As liquidity evaporated from Ruble, after three retail FX platforms abandoned trading of the USDRUB pair, Reuters reports, [4] the more liquid Norwegian Krone began acting as a proxy for the Russian unit of exchange. When the selling in the Ruble was at its peak, the Krone bore the brunt and smashed to its lowest level in over a decade, dropping below parity against its Swedish counterpart for the first time in almost 15 years.
Three retail currency trading platforms halted trading in roubles on Tuesday, citing growing signs of stress among the banks that underpin trade in the battered Russian currency.
FXCM, one of the biggest platforms catering to online and retail traders of currencies, said the move stemmed from the expectations of banks that Moscow would impose outright capital controls within the next few days.
Angus Campbell, an analyst at another platform, FxPro, said a number of the top tier-one banks that provide its liquidity had ceased quoting prices on one of its systems, prompting it to halt trading there.
A third platform, Alpari, also halted trade.
Which led anxious traders to shift to the Krone...
Traders and analysts said liquidity in the Russian rouble was evaporating fast and, to some extent, the more liquid Norwegian Krone was acting as a proxy for the Russian unit.
[5]
The Krone fell to its lowest in more than a decade against the dollar and dropped below parity against its Swedish counterpart for the first time in almost 15 years.
JPMorgan said in a note that a relentless slide in oil prices was pushing up yields on U.S. lower-rated bonds, boosting volatility in currency markets and hurting overall liquidity in the $5.5 trillion market.
"Although FX volumes this month are actually above average for a typical December, bid-offer spreads have been widening for several weeks, and the pace has quickened alongside recent moves in oil and credit," JPMorgan said.
"It is unlikely that this surge reflects year-end seasonals, as bid-offer spreads exhibit much less variation by calendar month than trading volumes do."
Source: Reuters [4]
