Announcement

Collapse
No announcement yet.

Official Allays Ruble Devaluation Fears

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Official Allays Ruble Devaluation Fears

    OFFICIAL ALLAYS RUBLE DEVALUATION FEARS

    Cbonds. Info
    21.10.2008 - RBC
    Russia

    The Russian government is not planning to devalue the ruble, Deputy
    Finance Minister Sergei Shatalov told reporters in the Armenian
    capital of Yerevan today. "No such actions are planned," Shatalov
    said, dispelling rumors of the possible ruble devaluation, Echo of
    Moscow radio reports.

    Rumors of the coming ruble devaluation appeared last week, prompting
    people to frantically buy dollars, with queues at exchange points in
    Moscow and some other regions reported on the weekend.

    The Central Bank of Russia interfered to stop the panic yesterday,
    providing less foreign currency to banks for currency swap operations,
    and thus strengthening the ruble by 1 percent against major foreign
    currencies.

    In the short term, the regulator's moves should soothe traders,
    experts say. Analysts polled by Vremya Novostei do not expect any
    significant increase in demand for foreign currency shortly, provided
    that speculative traders do not find another method against the
    Central Bank. In the long term, however, the ruble is set to weaken
    if oil prices continue to fall.

    Capital flight from Russia, the liquidity crisis in the banking sector,
    the collapsing stock market and shrinking international reserves -
    all this prompted speculators to launch a new attack on the ruble in
    the hopes of capitalizing on its depreciation.

    Last week speculators used currency swap operations to raise the
    dollar's exchange rate. Swap operations reached $7 billion on Friday,
    according to Yevgeny Nadorshin, an analyst at Trust Bank, and many
    traders hoped that the Central Bank would sell the same amount of
    foreign currency on Monday. On Friday evening, however, the Central
    Bank said it would limit its swap operations. Indeed, on Monday the
    Central Bank provided just RUB 50 billion for such transactions. As
    a result, the market was short of rubles, sending overnight lending
    rates to 45 percent on the interbank market. The ruble jumped RUB
    0.2 in the first minutes of trading.

    "As a result, swap operations immediately became very risky,"
    Nadorshin said, "It turned out that betting for a strong dollar is
    very unprofitable now."

    "The Central Bank took effective measures to ease the speculative
    pressure on the ruble," says Stanislav Yarushevichyus, at ING. "This is
    an important message to traders who tried to play against the Central
    bank on rumors of the ruble's devaluation. Most likely, such traders
    will close their positions over the next few days," he believes. The
    liquidity situation has stabilized slightly following reports that
    the Central Bank had issued RUB 387.7 billion in collateral-free
    loans. "This has calmed the market, and lending rates on the interbank
    market have dropped," Nadorshin said.

    Speculators whose bet on the dollar did not pay off will now be playing
    less aggressively against the Central Bank. In addition, tax payments
    are coming due, which will only add to demand for rubles. Otherwise,
    if banks continue betting on the strong dollar, using the Central
    Bank's funds, they might run short of cash for tax payments and
    obligations to clients, which easily leads to license revocation.
Working...
X