Ruble Falls after Central Bank Widens Ruble Trading Band

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Ruble Falls after Central Bank Widens Ruble Trading BandThe ruble extended its declines for the second day, touching the lowest level in five months, after investors deduced that the central bank’s move to ease its exchange-rate policy when the economic growth is declining possibly signals that it has accepted a weaker currency.

The ruble tumbled 0.3 percent to trade at 36.2860 per dollar as of 1:44 p.m. Moscow time, its weakest level since March 20. The Russian currency also fell 0.1 percent to 48.2395 per euro and fell 0.2 percent to 41.6689 versus the central bank’s benchmark basket of euros and dollars. The 10-year ruble bonds yield rose for the third straight day by 0.03 percentage points to 9.33 percent.

The central bank expanded the ruble’s trading band and refused to intervene, causing it to plunge further. Russia’s gross domestic product expanded 0.8 percent in the April-June quarter, the weakest pace since a decline in 2009.

“People regard the central bank’s decision to liberalize the ruble as a negative factor,” Aram Kazaryan, a Moscow-based foreign-exchange and interest-rates trader at OAO MDM Bank, told Bloomberg News.”The economy is not growing, but inflation is accelerating — even if we forget Ukraine events.”

The ruble, which is trading 0.9 percent close to a record low against the dollar, has also dropped due to a decline in oil prices since revenue from oil and gas sales finances half of Russia’s budget. The Brent Crude increased 0.6 percent to $102.13 after touching the lowest level since June 25, 2013 on Tuesday. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com