Rouble falls outside central bank boundary, Russian stocks down

MOSCOW Mon Jan 27, 2014 4:22am EST

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MOSCOW Jan 27 (Reuters) - The rouble continued to plunge on Monday morning, overshooting the central bank's floating corridor against a dollar-euro basket for the first time, as a rout of emerging market currencies continued.

At 0900 GMT the rouble was down 0.6 percent to 40.56 against the basket, outside the seven-rouble-wide range the central bank uses to gauge its interventions.

The corridor presently stretches from 33.50 to 40.50 roubles to the basket, having been moved four times last week after central bank interventions to break the rouble's fall.

The rouble was down 0.7 percent to 34.76 against the dollar, and by 0.5 percent to 47.64 against the euro.

The central bank declined to say what its intervention policy would be when the rouble overshoots the corridor. When the rouble is trading inside the corridor within one rouble of the boundary, interventions amount to $400 million a day.

The Russian currency has lost 5 percent against the basket since the start of the year.

The rouble is falling victim to a general sell-off in emerging currencies in response to the U.S. Federal Reserve's planned winding down of its monetary stimulus programme, which had fueled demand for emerging market assets.

Domestic factors have also exacerbated the rouble's unexpectedly strong devaluation, analysts said.

In a note on Monday, economists at Sberbank CIB said that the rouble's weakening was partly a result of sizeable central bank liquidity injections to support the banking sector.

The central bank expanded refinancing for banks by 282 billion roubles last week, with an additional 70 billion roubles deposited by the Finance Ministry, Sberbank CIB economists said.

"This lavish injection of roubles undoubtedly contributed to the currency's depreciation," they wrote.

VTB Capital analysts estimate the rouble has underperformed emerging market peers by around 2.5 percent this year.

Russian stock indexes were also down on Monday, with the biggest losses in the dollar-denominated RTS index.

At 0900 GMT the RTS had fallen 1 percent to 1,350.3 points, with the rouble-denominated MICEX index falling by 0.3 percent to 1,490.3.

Individual stocks were mixed, with energy giants Gazprom and Lukoil up 0.7 percent and 0.9 percent respectively, while Sberbank was down 1.1 percent and VTB Bank was down 1.2 percent.

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Russia in graphics: link.reuters.com/dun63s (Reporting by Jason Bush, additional reporting by Vladimir Abramov; Editing by Catherine Evans)

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