The Russian rouble fell to a record low against the dollar as investors fear further sanctions against the nation.
The rouble fell to 37.03 per dollar on Friday, its worst valuation since the currency was restructured in 1998.
The tumble comes weeks after Russia's central bank pledged to intervene less in the currency's valuation.
It also follows peace talks in Minsk between Ukrainian President Petro Poroshenko and Russian President Vladimir Putin in Minsk.
The market may have found the talks "disappointing" and renewed its concern over sanctions, said Manik Narain, emerging market strategist at UBS.
A recent weak economic performance and the conflict with Ukraine have combined with Moscow's commitment to intervene less with the value of the rouble, said Mr Narain.
Foreign reserves
Russia's central bank said earlier this month it would abolish from next year a so-called trading corridor, which limits its swing in value against currencies such as the dollar and euro.
Russia has more than $400bn of foreign currency reserves. When its currency is weak, it can spend dollars to purchase roubles in the market to shore up the value, he said.
In addition, Russia's weakened economic performance and its reliance on commodities such as oil and gas mean it may be less willing and able to do so, in addition to its commitment to a freer market for the rouble.
Preliminary gross domestic product data released earlier this month showed the economy growing by 0.8% in annual terms in the second quarter of 2014, compared with 0.9% in January-March.
Ilan Solot, emerging markets currency strategist at Brown Brothers Harriman in London said the reduced currency restrictions from Moscow were "bold but shows their commitment" to a freer market and may be a signal they want to be "seen as relaxed".
Ukraine's currency, the hryvnia, which itself hit a record low of 13.65 per dollar earlier in the week, strengthened to 13.61. Because the currency is less-broadly traded than the rouble it is more difficult to say why it moves, said Mr Solot.
Stocks fall
Russian stocks also fell. The dollar-denominated RTS index declined 1.9% to 1,196, falling below 1,200 for the first time since 8 Aug. The rouble-based MICEX index was 1.3% down to 1,405.
American bank Morgan Stanley said in a research report "escalation puts the 'investibility' of Russia into question. "In our worst case scenario involving full sanctions, a material portion of the listed stock market in Russia could become uninvestible for many investors".
The turmoil in the financial markets is happening as the war of words between Russia and the West intensifies. Nato has accused Russia of a "blatant violation" of Ukraine's sovereignty and engaging in direct military operations to support pro-Russian rebels.
Secretary-General Anders Fogh Rasmussen said that "despite hollow denials", it was now clear that Russia had illegally crossed Ukraine's border.
Russia denies sending troops and arms.
The rouble's value is the lowest against the dollar since 1998, when the currency was restructured, turning 1,000 old roubles into 1 new one.
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