Russian ruble sees second day of recovery

Filed on January 21, 2009

MOSCOW - The ruble strengthened for a second straight day on Wednesday, signaling a reprieve in the Russian currency's steady devaluation against the dollar and the euro.

As of midday in Russia, the ruble had recovered slightly to 36.9 against a currency basket made up of dollars and euros. The Central Bank has pursued in recent months a gradual devaluation policy, which has seen the ruble lose around a fifth of its value since November.

The ruble gained to 32.63 against the dollar, and 42.1 to the euro on Wednesday.

Russia's currency had weakened recently on the back of sliding oil prices and massive capital outflows, prompting analysts to call for a one-off depreciation of the currency. The Central Bank has spent billions of dollars of its foreign exchange reserves to shore up the flagging ruble.

Analysts at Alfa Bank in Moscow said this week's gains were sparked by tax payments coming due, forcing companies to sell foreign currency.

“We think that the ruble's rapid depreciation has already significantly damaged confidence in the local currency, so even if the ruble appreciates somewhat against the basket under tightening liquidity, dollarization will continue," said the bank's analysts in a note to investors.

Economy Minister Elvira Nabiullina said earlier this week the dollar exchange rate could reach as high as 35.1 this year.

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