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. Last Updated: 07/27/2016

Ruble Slides, Further Weakening Expected

After several months of hibernation, the ruble awoke last week and set off on a brief free float under the close watch of the Central Bank.

The currency, which remained in a tight band until the last days of December, slid to 28.16 rubles per dollar by Dec. 31, losing 19 kopeks in one week — marking the end of the flat trend that prevailed on the market since the middle of the year.

The ruble was traded at 28.50 rubles per dollar in mid-April, then appreciated some 70 to 80 kopeks and remained under 28 until the end of the year.

The Central Bank fixed the exchange rate at 28.16 rubles per dollar for the vacation period ending Thursday, giving the currency a 4.3 percent loss in nominal terms for the year, far below the consumer inflation rate of over 20 percent for 2000.

"The Central Bank's decision to let some steam out of the market was long overdue," said a trader at Impexbank who asked not to be named.

After a short dollar rally in December, the market lost momentum and drifted directionless ahead of the first official trading session Thursday.

"I think the ruble will be traded in the range of 28.20 to 28.50 in the coming weeks," said Stanislav Korobov, a trader with National Reserve Bank.

The market found equilibrium in the range of 28.55 to 28.60 rubles per dollar Wednesday, about where it ended last year in over-the-counter trades.

The dollar picked up slightly from an opening rate of 28.51 rubles per dollar after the Central Bank reported growth in corresponding accounts of commercial banks to 129 billion rubles, up from 107 billion rubles at the end of last year.

But the gains were limited and liquidity remained low.

Traders polled Wednesday said that they expected the Central Bank to spend some of its foreign exchange reserves this week to steer a soft devaluation of the currency.

The reserves were up to $28.3 billion as of Dec. 22 from $12.46 billion at the start of the year.

Central Bank Chairman Viktor Gerashchenko promised to keep the exchange rate of 28 rubles to 29 rubles per dollar "at least until the middle of 2001," Interfax said last week.

Gerashchenko was harshly criticized by President Vladimir Putin last week for what Putin said was the top banker's failure to clean up the nation's banking sector, prompting speculation that the chairman's days at the Central Bank are numbered and a staunch denial that he intended to resign.

The stock market plummeted nearly 9 percent to its lowest level in more than a year Wednesday as jittery world markets spooked investors.

The dollar-denominated Moscow Times Index of 50 leadings stocks dove 8.99 percent to 109.98 on anemic turnover of $8.89 million.

The consolidated RTS-Interfax ruble index ended down 7.89 percent to 143.87, and the index in dollars was down 7.89 percent to 30.45, its lowest level since December 1999.

The most liquid shares tumbled 9 percent to 14 percent in reaction to the continuing drop of world stock indicators, especially on Wall Street, where the Nasdaq fell 7 percent on Tuesday, the first trading day of 2001.

National power grid Unified Energy Systems led the decline, ending off 14 percent at $0.0697.