Russian rubles drops in early trading

June 01, 2012, Friday/ 13:54:00/ AP

Russia's currency, the ruble, on Friday dropped in early afternoon trading for the eighth straight day to reach its lowest level since April 2009.

The ruble lost 0.7 percent to 33.7 rubles against the U.S. dollar at the MICEX exchange two hours into the trading. The currency lost 2.2 percent on Thursday and over 5.3 percent this week, pressured by the lower oil prices, the backbone of Russia's economy. The Urals blend, viewed as a benchmark price for the oil that Russia exports, has lost more than 5 percent of its value this week and closed 0.8 percent lower, at $99.8, late Thursday. The ruble is also depressed by investor concerns over the future of the eurozone.

Finance Minister Andrei Siluanov on Thursday sought to reassure investors about the currency's outlook. He said the ruble is still traded within the limit that the Central Bank had set. "Everything that's happening corresponds with the monetary policy that the Central Bank has laid down for this year, and the government agrees with it," he said. The Central Bank regards 38.1 rubles against the basket comprising of dollars and euros as the limit for the currency's depreciation this year. The basket's value stood at 37.3 rubles in early afternoon trading on Friday.

Over the past week the Central Bank has largely refrained from propping up the ruble, selling just $100 million. Chris Weafer, chief strategist at the Troika Dialog investment bank, said in a morning note that "the Central Bank seems content to allow the lower oil - weaker ruble balance to remain untouched." Moscow-based investment bank Renaissance Capital last week warned of the upcoming depreciation of the ruble, but noted that the Russian currency so far looked better than many other currencies from emerging economies which were also battered by an uncertain outlook for the eurozone.

Hungary's forint was down 0.5 percent against the U.S. dollar on Friday while the Polish zloty shed 0.2 percent. Renaissance Capital sounded confident that a weaker ruble would not speed up inflation. "Russians no longer respond to the weakening of the ruble by rushing to convert their savings into forex," the bank said.

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