The Central Bank showed those who were in a hurry to declare the fall of the ruble that fighting panic was a simple technical matter.
Photo: Pavel Smertin
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Rumors about Ruble Rubbish
Rumors of the devaluation of the ruble (to 40/$) were answered yesterday when the exchange rate of the Russian currency to the currency basket ($0.55+ˆ0.45) rose from 30.4 to 30.16 and the ruble rose against the dollar by almost 20 kopecks to 26.06. The euro lost 22 kopeck for 35.17 rubles. The first taste of what the Central Bank had in store was had on Friday evening, when it placed a limit (50 billion rubles a day, while activity had reached $10 billion) on currency swap, that is, short-term credit using foreign currency as collateral.
The Central Bank had begun taking part in the process only last month, before which it was mainly used by banks, causing a surge in activities. Currency swap is profitable when dollar obtained against rubles increase in value two or three months after the deal. Dollar-ruble trading started out slow on the MICEX yesterday and interest rates grew to 40 percent, causing a tense situation. Even after they began to fall, the one-day MosPrime rate remained at a record-setting 21 percent.
Analysts say that, in the long-term, the ruble will weaken as a consequence of oil prices and the situation on the credit market, and it may still begin this week. They expect the ruble to fall about 5 percent. The Central Bank’s action yesterday was a response to rumors (it did not make issue statements about the rumors). Most of the players on the swap market are subsidiaries of foreign banks and currency speculators.
www.kommersant.com
All the Article in Russian as of Oct. 21, 2008
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