Russia's Central Bank Losing the Battle for the Rouble as MOEX Raises RUB Margin Requirements
- The CBR wants a free-floating rouble without the need for regular market interventions by January 2015. However, due to geopolitical factors rouble demand has suffered in 2014 making intervention a necessity that prevents free-falling devaluation.
The Central Bank of Russia (CBR) just announced that the bank has changed its intervention policy for the US dollar-rouble Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term rate and would now limit the size of its interventions to $350 million a day. The bank confirmed that it will continue to shift the rouble corridor by 5 kopecks after each tranche of $350mln is completed.
The bank has been incredibly active in managing the rate at which roubles are exchanged for US dollars, euros, yuan and gold, in response to extreme selling pressure following a destabilising conflict in the Ukraine and resulting sanctions in tandem with lower oil prices. In the first week of October, the CBR conducted almost $2 billion of currency intervention (RUB buying) in just two days.
One month on, and the USD/RUB rate has advanced (RUB depreciated) by over 12% and stands 20% lower year-to-date. The other issue that has changed is that the CBR has considerably less US dollar reserves on its balance sheet. The realisation of 'resistance if futile' when it comes to FX currency intervention against market forces seems to be dawning at the CBR.
Immediately after the CBR announcement at around 07:00 GMT, the USD/RUB rate rose to a new record high of 44.93 early in the European trading session. Against a basket of currencies including the euro and US dollar, the ruble depreciated by 2.9% to a record low of 50.08.
Russia's central bank also announced the introduction of a new 12-month FX repo auction aimed at providing stability to the Russian banking system and reducing the pressure on the rouble. The first auction is expected to take place in mid-November, with a limit of $10 billion.
MOEX
In related news, MOEX, the largest Russian Stock Exchange Stock Exchange A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments. By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividendsStock exchanges have developed into a permanent fixture in the fin A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments. By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividendsStock exchanges have developed into a permanent fixture in the fin Read this Term, has decided to raise minimum base initial margin requirements for the USD/RUB and EUR/RUB foreign exchange futures contracts as of today. The new requirement for both contracts is being set at 5.5% compared to the previous 4.5%.
This is in addition to the expanded initial FX margin requirements introduced on October 31st.
The Central Bank of Russia (CBR) just announced that the bank has changed its intervention policy for the US dollar-rouble Exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term rate and would now limit the size of its interventions to $350 million a day. The bank confirmed that it will continue to shift the rouble corridor by 5 kopecks after each tranche of $350mln is completed.
The bank has been incredibly active in managing the rate at which roubles are exchanged for US dollars, euros, yuan and gold, in response to extreme selling pressure following a destabilising conflict in the Ukraine and resulting sanctions in tandem with lower oil prices. In the first week of October, the CBR conducted almost $2 billion of currency intervention (RUB buying) in just two days.
One month on, and the USD/RUB rate has advanced (RUB depreciated) by over 12% and stands 20% lower year-to-date. The other issue that has changed is that the CBR has considerably less US dollar reserves on its balance sheet. The realisation of 'resistance if futile' when it comes to FX currency intervention against market forces seems to be dawning at the CBR.
Immediately after the CBR announcement at around 07:00 GMT, the USD/RUB rate rose to a new record high of 44.93 early in the European trading session. Against a basket of currencies including the euro and US dollar, the ruble depreciated by 2.9% to a record low of 50.08.
Russia's central bank also announced the introduction of a new 12-month FX repo auction aimed at providing stability to the Russian banking system and reducing the pressure on the rouble. The first auction is expected to take place in mid-November, with a limit of $10 billion.
MOEX
In related news, MOEX, the largest Russian Stock Exchange Stock Exchange A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments. By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividendsStock exchanges have developed into a permanent fixture in the fin A stock exchange, also known as a securities exchange or bourse represents is a facility where stockbrokers and traders can buy and sell securities.This includes shares of stock, bonds, exchange-traded funds (ETFs), or other financial instruments. By extension, stock exchanges can also provide facilities for the issue and redemption of such securities and instruments and capital events including the payment of income and dividendsStock exchanges have developed into a permanent fixture in the fin Read this Term, has decided to raise minimum base initial margin requirements for the USD/RUB and EUR/RUB foreign exchange futures contracts as of today. The new requirement for both contracts is being set at 5.5% compared to the previous 4.5%.
This is in addition to the expanded initial FX margin requirements introduced on October 31st.