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. Last Updated: 07/27/2016

Bank Leaves Ruble to Stumble

The ruble slipped Tuesday after the Central Bank opted to save reserves for upcoming foreign debt payments instead of dipping into them to defend the ruble, dealers said.

The ruble's weighted average for today settlement on the unified session of eight exchanges dropped to 28.4920 per dollar from 28.4446 per dollar Monday, just shy of the 28.50 level that dealers say has prompted intervention recently.

Based as usual on the average of the session, the Central Bank set its next-day exchange rate at 28.49 rubles per dollar FXSU, down from the previous 28.44.

"The [Central] Bank is holding on to its reserves because of debt payments in the first quarter," Alexei Bukleyev, Alfa Bank dealer said. "If they have to make these payments without help from the IMF, as [Central Bank head Viktor] Gerashchenko said, they have to stop spending their reserves."

Gerashchenko said Tuesday that Russia was unlikely to receive long-awaited financial support from the IMF in the first quarter of this year.

He also said the ruble would gain strength but his comments failed to stop the currency from weakening.

"In January, despite seasonal fluctuations in the dollar, I think the ruble will strengthen, because those rates we have seen have been of a temporary, speculative character," Gerashchenko said.

"This statement was made to scare the market. It's a replacement of intervention with psychological pressure," Alfa Bank's Bukleyev said.

Dealers said the Central Bank used foreign exchange reserves recently to prop up the ruble at 28.50 per dollar to meet continuous dollar demand.

But on Tuesday, the bank apparently changed tactics to save foreign currency reserves ahead of about $3 billion of foreign debt payments that fall due in the first quarter.

Trade volume, which if high, generally indicates the presence of the Central Bank at the unified session, was down to just $170 million on Tuesday from a previous $238 million. Dealers said this suggested the Central Bank had not intervened. Gerashchenko, speaking to reporters at a meeting of central bank representatives from the Commonwealth of Independent States, also said Russia would service its foreign debt in the first quarter as foreign exchange reserves were adequate.

"We have accumulated more reserves, so the first quarter should be okay [for foreign debt servicing]," he said. Rubles for next-day settlement were softer in afternoon trade, quoted at 28.5300/28.5400 per dollar by midday after a previous average of 28.5189.