Big drop in Russia's currency reserves

Source: Agencies  |   2008-10-31  |     NEWSPAPER EDITION

RUSSIA'S hard currency reserves dropped a record US$31 billion last week as the country spent money on keeping the ruble from plummeting and the banking sector from melting down, the central bank said yesterday.

The central bank said in a statement its international foreign exchange reserves fell to US$484.7 billion as of Friday, down from US$515.7 billion a week before.

That's the biggest weekly drop this year and brings the bank's reserves to the lowest level since January as Russia's finances get battered by the global financial crisis and falling oil prices.

The ruble has declined steadily since Russia's August war with Georgia, losing around 13 percent of its value against the United States dollar as investors pulled money out of the country and prices in oil and natural gas ?? upon which Russia's wealth depends ?? dropped sharply.

Without intervention by the central bank, which began in early September, analysts say the Russian currency might have fallen farther and faster.

Earlier this week, First Deputy Prime Minister Igor Shuvalov ?? one of the Kremlin's point men on the economic crisis ?? tried to reassure investors, saying the government was "not afraid of running out of money."

Until this summer, the ruble had been gaining for several years on the back of higher oil, gas and mineral prices, reaching 23.14 against the US dollar in July, its highest level in 9 years.

But since then, the ruble has slipped, closing at 26.95 against the US dollar on the MICEX exchange on Wednesday.

Yesterday, the ruble strengthened markedly to 26.6 rubles to the US dollar in MICEX trading, reflecting a greenback plunge in the wider global currency markets.