Russia Scrambles to Defend Ruble Amid Capital Security Concerns
Wednesday,01/10/2014|11:35GMTby
George Tchetvertakov
The CBR is rumoured to be on the verge of implementing capital controls for the first time since 1998, as the country maintains its overwhelming dependence on lofty oil prices and artificial market controls in ruble flows.
The Central Bank of Russia (CBR) is being buffeted on several fronts this week as the bank struggles to contain rampant ruble speculation with rumours surfacing yesterday and today that the bank will implement capital controls to dampen the impact of significant capital flight from Russia in the near future. According to TASS news agency, the CBR is considering artificial currency management and capital controls.
Market speculation that the CBR is considering capital controls sent RUB currency pairs spiralling lower. Against the US dollar, the ruble reached a multi-year low of 39.77 before paring back some losses late in the Asian trading session on Wednesday. Against the euro, the ruble is trading above 50.00 for only the second time since late 2008.
Using the CBR's own valuation of the ruble compared to the basket of euros and US dollars, the ruble fell beyond the 44.40 level which the CBR references as the 'line in the sand' beyond which intervention will occur.
The CBR widened the ruble’s trading band in August of this year in preparation for a free-floating ruble next year - a policy shift that would make interest rates rather than reserve utilisation as the primary mechanism for controlling currency movements and managing inflation.
The ruble was also weaker after the CBR conducted its first overnight ruble-dollar swap operation to boost banking Liquidity . The CBR announced that the size of the ruble-dollar swap operation equalled $581 million. This was the first time the bank used this mechanism since its introduction on September 16th, 2014.
There's No Russia without Oil & Gas
CBR’s First Deputy Governor Ksenia Yudayeva.
In related news that affects both Russia, the US dollar and crude oil prices, the CBR has announced that it will assume an “oil price of $60 per barrel in its new stress scenario for monetary policy,” according to CBR’s First Deputy Governor, Ksenia Yudayeva.
"The purpose of this scenario is to prepare a shock scenario to work out an action plan which we would implement to limit negative effects," said Ms. Yudayeva.
Russian authorities are once again in a quandary as how to best to reign in speculative attacks on the ruble, support an ailing ruble bond market, as well as how to protect Russia's biggest source of revenue - raw material and commodity sales. As the ruble has been falling in value against the US dollar for almost the 11th week in a row, holders of ruble-denominated bonds are suffering twice over in terms of a depreciating currency and exposure to falling bond prices.
Russia is no stranger to capital restrictions caused by international financial effects. Russia first imposed restrictions on capital outflows in 1998 when the ruble's decline led to a default on sovereign ruble-denominated debt. Those capital controls were only removed in 2006. Implementing similar controls today risks damaging Russia's ambition to compete in the international financial markets without government assistance and with a free-floating currency.
The Central Bank of Russia (CBR) is being buffeted on several fronts this week as the bank struggles to contain rampant ruble speculation with rumours surfacing yesterday and today that the bank will implement capital controls to dampen the impact of significant capital flight from Russia in the near future. According to TASS news agency, the CBR is considering artificial currency management and capital controls.
Market speculation that the CBR is considering capital controls sent RUB currency pairs spiralling lower. Against the US dollar, the ruble reached a multi-year low of 39.77 before paring back some losses late in the Asian trading session on Wednesday. Against the euro, the ruble is trading above 50.00 for only the second time since late 2008.
Using the CBR's own valuation of the ruble compared to the basket of euros and US dollars, the ruble fell beyond the 44.40 level which the CBR references as the 'line in the sand' beyond which intervention will occur.
The CBR widened the ruble’s trading band in August of this year in preparation for a free-floating ruble next year - a policy shift that would make interest rates rather than reserve utilisation as the primary mechanism for controlling currency movements and managing inflation.
The ruble was also weaker after the CBR conducted its first overnight ruble-dollar swap operation to boost banking Liquidity . The CBR announced that the size of the ruble-dollar swap operation equalled $581 million. This was the first time the bank used this mechanism since its introduction on September 16th, 2014.
There's No Russia without Oil & Gas
CBR’s First Deputy Governor Ksenia Yudayeva.
In related news that affects both Russia, the US dollar and crude oil prices, the CBR has announced that it will assume an “oil price of $60 per barrel in its new stress scenario for monetary policy,” according to CBR’s First Deputy Governor, Ksenia Yudayeva.
"The purpose of this scenario is to prepare a shock scenario to work out an action plan which we would implement to limit negative effects," said Ms. Yudayeva.
Russian authorities are once again in a quandary as how to best to reign in speculative attacks on the ruble, support an ailing ruble bond market, as well as how to protect Russia's biggest source of revenue - raw material and commodity sales. As the ruble has been falling in value against the US dollar for almost the 11th week in a row, holders of ruble-denominated bonds are suffering twice over in terms of a depreciating currency and exposure to falling bond prices.
Russia is no stranger to capital restrictions caused by international financial effects. Russia first imposed restrictions on capital outflows in 1998 when the ruble's decline led to a default on sovereign ruble-denominated debt. Those capital controls were only removed in 2006. Implementing similar controls today risks damaging Russia's ambition to compete in the international financial markets without government assistance and with a free-floating currency.
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Charlotte reflects on the Summit so far and talks about the culture inside fintech banks today. We look at the pressures that come with scaling, and how firms can hold onto the nimble approach that made them stand out early on.
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We speak about market structure, the institutional view on liquidity, and the sharp rise of prop trading, a sector Drew has been commenting on in recent months. Drew explains why he once dismissed prop trading, why his view changed, and what he now thinks the model means for brokers, clients and risk managers.
We explore subscription-fee dependency, the high reneging rate, and the long-term challenge: how brokers can build a more stable and honest version of the model. Drew also talks about the traffic advantage standalone prop firms have built and why brokers may still win in the long run if they take the right approach.
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A concise look at where compliance, onboarding, and AI-driven processes are heading next.
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Read the article at: https://www.financemagnates.com/thought-leadership/exness-expands-its-presence-in-africa-inside-our-interview-with-paul-margarites/
#exness #financemagnates #exnesstrading #CFDtrading #tradeonline #africanews #capetown
Finance Magnates met with Paul Margarites, Exness regional commercial director for Sub-Saharan Africa, during a visit to the firm’s office opening in Cape Town. In this talk, led by Andrea Badiola Mateos, Co-CEO at Finance Magnates, Paul shares views on the South African trading space, local user behavior, mobile trends, regulation, team growth, and how Exness plans to grow in more markets across the region. @Exness
Read the article at: https://www.financemagnates.com/thought-leadership/exness-expands-its-presence-in-africa-inside-our-interview-with-paul-margarites/
#exness #financemagnates #exnesstrading #CFDtrading #tradeonline #africanews #capetown
