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. Last Updated: 07/27/2016

Ruble Slides as Volatility Fears Rise

The ruble fell against the U.S. currency Tuesday and the Central Bank opted to sell dollars to stabilize the ruble, propelled into a roller coaster by the award of an investment grade to Russia.

The ruble for today delivery fell 12.5 kopeks to a weighted average of 30.2399 per dollar from 30.1148 the previous trading day, but it recovered some strength after the Central Bank started to sell dollars at 30.2350, dealers said.

"I am far from thinking that the Central Bank is seeking to protect the dollar's upside but it clearly does not like it when the official exchange rate gets too volatile," a foreign bank dealer said.

Last week, Moody's put Russia in the club of nations of lower investment risk, opening the door to a broader range of investors.

The upgrade triggered the rise of the ruble to a 22-month high against the dollar as banks took ruble positions.

But the rise has faltered after the Central Bank on Monday branded the ruble's advance as speculative and bought more than $1 billion to prevent it from breaking through a psychologically important level of 30.

Dealers said the Central Bank could have sold about $500 million to calm the market down on Tuesday with one large market player also seen on the dollar-selling side.

"There is still an upside for the dollar going to 30.30, but in general, my view on the ruble is absolutely bullish," the dealer said.

Other bankers also said that the current weakness of the ruble could only be a temporary relief to the Central Bank, given high prices for crude oil, Russia's key export, and weakness of the dollar against global currencies.

UFG investment house said that although the Central Bank named no specific level of dollar support, it was likely to oppose any fast appreciation of the ruble.

"We believe that the Central Bank will not allow the dollar to trade below 30 ... at least for any lengthy time," UFG said in its market comment.

The Central Bank had pledged to keep the real effective appreciation of the ruble under 6 percent this year to help local producers stay competitive with foreign goods.

Central Bank chief Sergei Ignatyev said Monday that Moody's upgrade would make it more difficult for the bank to meet its yearly inflation and ruble rate targets.