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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.
Prime Minister Vladimir Putin said on Sunday Russian gas export monopoly Gazprom GAZP.MM has lost around $800 million in revenues because of the dispute. The firm's sales are poised to shrink further as gas prices are catching up with lower oil prices thus reducing key budget contributions.
Russian President Dmitry Medvedev has criticised Putin’s government for being too slow to implement a $200-billion-plus rescue package for the economy and financial markets. Analysts said it was too soon to tell whether the new year was bringing an acceleration of the rouble’s depreciation.
Mindful of the 1998 financial crisis -- the year when the rouble lost around 70 percent of its value -- Russians have been shifting money into euros and dollars, thus adding further pressure onto the national currency.
In a bid to ease depreciation pressure, the central bank has raised official rates. At the same time, the global credit crunch and expectations of a rouble depreciation have pushed up inter-bank borrowing costs to historic levels, adding more pain for companies.
President Medvedev mentioned the possibility of lower interest rates in the future.
“The interest rates can only be lowered if devaluation fears are either realised or disappear as a result of a jump in oil prices,” said Vladimir Osakovsky, analyst at UniCredit.
Some analysts say Russia needs to devalue the rouble as quickly as possible so that it can start on the process of rate cuts necessary to support the once-buoyant economy and avert the loss of millions of jobs and social instability.
Negative growth is forecast this quarter and next, while Purchasing Managers Indexes suggest that contraction -- Russia’s first in a decade -- has already started in December.
The Institute of Globalisation and Social Movement on Monday estimated unemployment could double this year from around 5 million people in 2008.
The weaker rouble has hurt Russian companies with foreign debt, and there are signs that any benefits for importers could be limited by countries taking protectionist measures.
Kazakhstan, for example, is contemplating raising import duties for Russian goods [ID:nLC184820].
-- For a FACTBOX on rouble depreciation see [ID:nRUBFACTS]
-- For stories on the gas row see [ID:nLV634765] (Additional reporting by Yelena Fabrichnaya; Editing by Ruth Pitchford)
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