UPDATE 2-Russia rouble devalued again, gas row adds pressure

Mon Jan 12, 2009 11:00am GMT
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By Toni Vorobyova

MOSCOW, Jan 12 (Reuters) - Russia let the rouble's value fall on Monday for the second time this year as weak oil prices, the gas row with Ukraine and the prospects of an economic recession kept downward pressure on the currency.

The move, the 14th mini-devaluation in around two months and the second in as many days, keeps up the pace of late December, when the rouble weakened on six of the last 10 trading days.

Russia's gas row with Ukraine -- and Europe's calls for diversifying gas supply -- has called future gas revenue into question and added to pressure on the currency because of the economy's heavy focus on export of natural resources.

By 0946 GMT, the rouble had weakened to 35.80 versus a euro-dollar basket RUS=MCX, breaching the 35.30 level seen as the central bank support the previous day. A source at the central bank confirmed the trading corridor had been widened.

The currency has now lost nearly 3 percent in the first two trading days of 2009, building on a fall of around 16 percent in 2008. It still has a long way to go to catch up with oil, a key Russian export which lost over half its value last year CLc1.

"The slowdown in the economy further adds to the depreciation pressure, but the main reason for the currency going weaker is the ... oil price, the global rise in risk aversion -- therefore investors are less keen to invest their money in Russia -- and now also this gas factor," said Ulrich Leuchtmann, analyst at Commerzbank Corporates & Markets in Frankfurt. "Everybody is arguing for a more diverse supply of gas, less dependency on Russian gas. Therefore this will have an effect in the long run and the FX market is estimating it even now."

Russian gas supplies to Europe via Ukraine have been halted for nearly a week due to a pricing row between Moscow and Kiev.  Continued...

 

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