MOSCOW: Russia’s economy minister yesterday welcomed the ruble’s rapid slide to historic lows as a boon for exporters that should help industry and promote stalling growth.
The ruble began trending lower in late December and has lost nearly two percent of its value against both the dollar and euro in the last three trading sessions alone. The euro shot up one percent to 47.65 rubles in the opening minutes before pulling back to around 47.30 in evening trading on the Moscow Exchange — still above the 47.25 record it had set in the worst months of Russia’s 2008-2009 financial crisis.
The dollar was trading at 34.60 rubles after reaching a five-year low point of 34.80. “Like in any panic situation, the future is becoming rather hard to predict,” Austria’s Raiffeisen Bank observed.
The latest moves prompted the US investment giant Goldman Sachs to revise its year-end forecast for the dollar to 35.20 from 33.50 rubles.
It added that the euro would probably be worth 41.50 rubles by the end of 2014 rather than the 39.50 target it had originally set.
But Economy Minister Alexei Ulyukayev sounded an upbeat note about the decline that is likely only to spur further ruble selling. “I am not a proponent of stimulating the economy through an artificial weakening of the ruble,” Ulyukayev told Moscow’s Prime business news agency.
“But since what we have now is not an artificial but a natural weakening ... then why not enjoy its positive effects?” he asked. “This will help improve the competitiveness of a range of industries,” the economy minister stressed.
Central bank chief Elvira Nabiullina also told Russian television that the ruble’s rate “was being set by the market” and gave no hint of a plan to rush to the currency’s defence. Russia’s industrial production was flat last year amid weak investment and reduced demand — both domestic and foreign — for such factory staples as steel.
The Rosstat official statistics agency reported yesterday that capital investment had actually declined last year by 0.3 percent after initial expectations of a 2.5-percent rise.
And economic growth of about 1.4 percent delivered a shock to a Russian government that had initially projected 2013 expansion to come in at 5.0 percent and then accelerate in following years.
Traders attributed the ruble’s latest drop to highly negative investor sentiment about emerging markets and diminishing central bank support for Russia’s beleaguered currency.
Moscow intends to introduce a fully floating exchange rate starting next year while shifting its focus to the fight against persistently high inflation—measures roundly applauded by economists but feared by consumers. The Russian central bank eliminated some of its support measures for the ruble earlier this month and no longer spends $60m a day on “targeted” intervention measures.
It still makes between $200 million and $400 million a day in ruble purchases when the Russian currency slips outside the bounds of a predetermined trading band.
But the central bank reserves the right to shift that trading corridor to a higher exchange rate as pressure on the ruble mounts — a step it repeated for the third successive business day yesterday.
AFP
