Laura Cochrane and Emma O’Brien
Tuesday, November 11, 2008
Nov. 11 (Bloomberg) — Russia’s ruble fell the most in two months and stocks tumbled as the central bank scaled back its defense of the currency amid the country’s worst financial crisis since the 1998 devaluation.
Bank Rossii widened its target range for the ruble against a basket of dollars and euros by 30 kopeks (1 cent) to increase the currency’s “flexibility,” according to a statement posted on its Web site after the market closed today. The Micex Index plunged 13 percent, the biggest decline worldwide today, and won’t open tomorrow, spokeswoman Anna Cheryomushkina said.
“They’re going to move the line in the sand back a little bit, where they hope they can defend it,” while resisting a formal devaluation that would erode confidence in ruble deposits, Chris Weafer, chief strategist at UralSib Financial Corp. in Moscow, said in an interview today. “If people start to lose confidence in the banking system, we could have a massive run on the banks as we saw twice in the nineties, and then the game is up.”
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Russia drained 19 percent of its currency reserves to stem a 17 percent slide in the ruble against the dollar since the start of August, prompting warnings of possible downgrades from Fitch Ratings and Standard & Poor’s. Financial turmoil has forced the country’s largest oil and steel producers to seek tax breaks, while the defense industry is failing to meet government orders.
This article was posted: Tuesday, November 11, 2008 at 10:34 am