Rouble slides further after central bank policy shift

MOSCOW: The rouble sank further on Thursday, hitting another all-time low against the dollar, a day after the central bank softened its stance on defending the currency following heavy forex market interventions in October.

At 0855 GMT, the rouble was 0.89 percent weaker against the dollar at 45.35 and lost 1.14 percent to trade at 56.71 versus the euro.

That left the Russian currency 1.02 percent weaker at 50.47 against a dollar-euro basket. Central bank data on Thursday showed the bank spent over $29 billion defending the rouble in October, the largest monthly amount it has spent since early 2009.

But under new rules announced on Wednesday, the bank said it would limit daily interventions to just $350 million a day, barring threats to financial stability.

"If oil and geopolitical risks remain, we doubt the correct USD/RUB rate should be much lower," Dmitry Polevoy, chief Russia economist at ING Bank in Moscow, said in a note.

"Therefore any interventions to strengthen the rouble without an improvement in external conditions will just provoke another wave of speculation under the slogan 'buy on dips'."

Plunging oil prices and Western sanctions over the Ukraine crisis have shrivelled Russia's exports and investment inflows, driving the rouble lower over several months. European Union leaders have said there is little chance the sanctions will be removed in the near future.

Brent crude prices slipped again on Thursday, falling below $83 as a fragile global economic outlook overturned short-term optimism over a lower-than-expected rise in US crude stocks.

Economic data provided a further drag on the Russian currency. Russia's service sector contracted in October at the fastest pace since May, a survey showed, while data showed annual inflation quickened last month to 8.3 percent, well above official targets.

Russian shares were broadly stronger on Thursday, with Russia's rouble-denominated MICEX index posting gains for the eighth straight session. Analysts have linked gains in the resource-heavy index to a weaker rouble, which boosts commodity exporters' rouble earnings.

At 0850 GMT, the MICEX was up 0.9 percent at 1,508 points after breaking through the 1,500 mark for the first time since July 10. The dollar-denominated RTS index, however, slipped for the third day in a row and was down 0.7 percent at 1,047 points.