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. Last Updated: 07/27/2016

CB Breaks Ruble's Fall Near 31

MTPedestrians passing a money exchange selling dollars for 31.02 rubles Sunday.
The ruble broke through the psychologically important 31 per dollar level on Friday, but dealers said the Central Bank prevented it from doing so in the official session.

The ruble edged down in official early trade to a weighted average for today settlement of 30.9436 to the dollar from 30.9404 on Thursday, its stability stemming largely from the Central Bank's support, dealers said.

"The Central Bank resisted the ruble slide offering dollars at 30.9449, but nevertheless the market expectation is for further dollar strength and for tomorrow settlement the ruble was already quoted above 31 level," said a dealer at one of the foreign banks.

But in another forum for ruble trade -- the interbank market -- the national unit for next-day settlement was traded at 31.0260/31.0360 in afternoon trade with no Central Bank intervention seen on that market, dealers said.

"That may mean that the Central Bank does not want to allow the official ruble rate to go down sharply and wants to achieve that without wasting too much of its reserves," the dealer said.

During the unified session, the dollar traded in a 30.9385 to 30.9600 range, with the last deal registered at 30.9420.

Based on the session's results, the Central Bank set its official next-day ruble rate at 30.9436 compared with 30.9404 the day before.

The Central Bank, a key ruble supporter, intervenes in the market only when it sees the ruble is depreciating too swiftly. The bank fears that too fast a fall could trigger people's discontent of their shrinking income.

As of Feb. 22 the Central Bank's reserves fell by $600 million to $32.2 billion -- the largest weekly drop this year -- and dealers said the decline may limit its intervention volumes.

"During the next week the situation will likely be the same: The Central Bank will resist the decline of the ruble in the unified session and will stay away from the interbank market as it would cost it more to prop up the ruble," said a dealer at one of the country's largest banks.

Dealers said they had no doubts the ruble would continue to depreciate, but at a slower pace as pressure on the national currency would ease as Russia has to pay off less foreign debt in March.

The Central Bank had cited the government's demand for hard currency to pay its foreign debt as the main reason behind the ruble weakness last month.