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


The Central Bank of Russia (CBR) just announced that the bank has changed its intervention policy for the US dollar-rouble exchange 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.

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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.

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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.


In related news, MOEX, the largest Russian stock exchange, 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.

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