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Ruble Tumbles Despite Russian Rate Hike
The USDRUB rate is back above 36.00 - nearing its record lows - despite a surprise Russian rate hike this morning aimed at stalling the capital outflows. It seems Lavrov's comments that Kiev will face "bloody justice" geopolitical angst is trumping any arbitrage or macro data flows for now. Russian stocks are also fading.
The Ruble continues to weaken...
Goldman's view of the rate hike...
The CBR unexpectedly raised all its rates by 50bp and the key rate now stands at 7.5%, citing increased risks to its 5% end-year inflation target stemming from more pronounced exchange rate pass-through, a rise in inflation expectations and food price dynamics.
In addition, the CBR indicated that it does not intend to lower policy rates in "the coming months" and that today's decision should ensure that inflation does not exceed 6% at year-end. In our view, there are two possible explanations for today's surprise rate hike: (i) concerns about risks to inflation expectations and CBR credibility against the backdrop of above-target inflation; and (ii) a desire to reduce demand for CBR liquidity provision so that the repo rate once again becomes the binding and market-determining policy rate.
We think raising the key rate to a level where the higher rates, including the FX swap rate, do not draw demand is likely a prerequisite for resuming the move towards introducing greater Ruble flexibility.
The fact that the CBR has raised rates today therefore suggests to us that the Bank intends to move in this direction more quickly than anticipated. Separately, the CBR announced the introduction of a new 3-year liquidity provision facility at 6.5% against collateral of state-guaranteed loans for investment projects but did not provide further details on eligible collateral, allotment or timing.
We believe that the facility is at this stage more experimental and we will need to see the project pipeline to see its impact on liquidity and rates. Nevertheless, in our view it is a step backwards towards less transparency and a less equal playing field in the banking sector.
As Ransquawk adds, its been a volatile morning...
The Russian Micex traded lower at the start of the session after Russia was cut by S&P from BBB to BBB-. However, losses were trimmed after Russian foreign minister Lavrov said Russia will push to de-escalate the Ukraine conflict despite accusing US Secretary of State Kerry of using a prosecutorial tone.
This was later followed by reports of a Ukraine helicopter damaged after shot by a sniper and comments from Russian President Putin saying Russia should increase production of anti-missile systems.
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They didn't poke the bear with a stick, they hit him in the nuts with a baseball bat.
Economic warfare trumps all. Get set for the mano-a-mano shit to start up soon.
They were so close to getting to that gold first........so close.
the dollar will be rubble one day
Not only did they whack the bear's junk, the bear was hibernating and is hungry for last year's empire. Our pigeon is clueless as always.
That's why they need to cut ties with the dollar. America can't just use the petrodollar to play fucker with it.
The days of the petro-dollars are counted. The blunder from the West in Ukraine will cost the USSA their reserve currency status. The BRICS are moving full speed with the implementation of their new trading system.
And when in May does Putin go to China for the signing of the trade agreement?
I suspect it will be in the 1st May Monday.
1. Back it with gold.
2. Get working on the Anti-Bolshevik Federation and get Germany on board.
3. Game over.
russia has a trade surplus, they should just default on all debts public and private
they don't export rubles.
"the taking and holding of Ukraine"'still looks pretty iffy to me.
Are people still accepting the ruble as payment?
Seems like the BRIICS may be doing their own thing soon.
What is the "value" of a currency, nobody wants?
It seems to me that people all over the world are consfused about the definition of real value.
Let me be clear, so long a fraud is the status quo, possession will be the law
and ALL paper will go to zero.
strong trend to 45. but if russian develvate EU bank will suffer the most
So you see, Gennady, another crash in the ruble and the MICEX is inevitable, sooner or later, simply as a consequence of the Fed’s current policies, whether we annex parts of the Near Abroad, or not. The question is just whether we initiate it ourselves, and ride the storm, first using the threat of a global financial crisis to manipulate and damage our enemies, or else are mere passive victims of the cycle, as we were in the last two iterations. The question is whether we Russians are capable of learning anything from experience, whether we have learned not to be the greatest fools in an artificial bull market. Perhaps, if we can develop the political will to abandon convertibility quickly enough, we can even avoid being caught in the crash, this time. The reserves the Fed forced us to accumulate will allow us to postpone the decision for years, if we’d like, and in that amount of time, it may even be possible to complete the operation and escape default and devaluation. If not, well, those are both things we know how to do, and last time the pain only lasted two or three years, which is nothing.
"The question is whether we Russians are capable of learning anything from experience, whether we have learned not to be the greatest fools in an artificial bull market."
You need to do the same thing as the United States needs to do. Stop using fiat Rubbles and fiat Dollars.
Use real money: gold or silver.
Finance systems based on fraud inevitable crash.
i think escalation is good for russian people, sooner the oligarch's empire collapses the better, they should finaly find the guts and nationalize their national assets back and sell them for fair price ...some executions would also help
Is this about Gold, Oil, Natural Gas or Petrodollars ????
oh... and me was thinking this was bout democrazy...
The cost of cabbage is going to the moon...vodka too....its going to be bad for the average Russian drunk..
"1. Back it with gold."
Say you'll only accept rubles when selling oil. Problem solved. Or you can give some kind of a discount when using the ruble. Any other currency used for payment will be converted to rubles at the going rate plus a 3% service charge.
How trade actually works is, say, between Russia and China if one country imports a billion dollars/rubles/whatever worth of oil and the other imports a billion worth of plastics, then accounts are credited inside each country and imbalances settled without any money actually changing hands. There is a possibility that money associated with trade surpluses and deficits are transferred, but most likely they also remain in each country's own accounting database as credit.
Petrodollar is a physical dollar if we're talking oil traded in Saudi Arabia or Mexico. In Russia, the petrodollar is a pricing mechanism. When selling oil to China they'll read the index, convert it to local currencies and conduct trade that in the process of setting balances between banks will likely involve little or no currency of any kind.
Currency comes into play for strategic reserve accumulation - when banks buy foreign fiat paper to have it on hand, but that process is completely detached from the oil trade. There a dollar is just a dollar - not a pertrodollar.
Currency wars happen mainly with accounting records - not money being exported or imported by truckload. A bank that has credited a foreign country chooses to say: "we no longer owe anything" or "if you want your credit to preserve its validity, transfer into our possession an X amount of gold".
russia can sell the warehouses full of diamonds ..... they could back the ruble with diamonds .... or perhaps palladium.... or trees
I do remember reading somewhere about the boatload of diamonds they found in a meteorite crater somewhere in Siberia.
Against what,...the US dollar? lol!
FU Putin