Despite Surprise Rate-Hike, Russian Ruble Crashes Most In 6 Years

Yesterday's record-breaking surge in the Ruble appears, as we warned, to have been front-running today's rate-hike announcement... and despite its surprise size, it is disappointing the market. The 5%-plus swing higher in the Ruble yesterday has been notably retraced as the Russian currency plunges (biggest drop in almost 6 years) after the central bank hiked rates 150bps (expectations were broadly of a 50bps hike) but it appears the 'whisper' number was a 200bps hike and a shift in FX policy to more active intervention. The inituial rip rally instantly faded and despite low liquidity due to Russian holidays, USDRUB is back over 43 - which would be a new record low close if it holds.

Russian Central Bank disappointed...

  • *RUSSIAN CENTRAL BANK RAISES KEY RATE TO 9.50% (up from 8%) 
  • *BANK OF RUSSIA DOESN'T ANNOUNCE CHANGES TO FX POLICY
  • *BANK OF RUSSIA SEES SIGNS FOR SLOWING INFLATION IN MID-TERM
  • *BANK OF RUSSIA READY TO EASE IF EXTERNAL CONDITIONS IMPROVE


22 of 31 economists in Bloomberg survey forecast 50bps increase; 2 predicted move to 9%; increases of 25bps and 75bps forecast by 1 each; 5 economists projected no change

The reaction:

  • *RUBLE EXTENDS DECLINES, WEAKENS 2.9% VS BASKET

 

Biggest plunge in almost 6 years

 

Analysts react:

  • *RUSSIAN RATE RISE WON'T `SIGNIFICANTLY' SUPPORT RUBLE: NORDEA
  • *RUBLE WEAKNESS IS `BEYOND SPHERE OF MONETARY POLICY': NORDEA
  • *RBS: RATE RISE WON'T ELIMINATE FX SHORTAGE BEHIND RUBLE DROP

The weakness has prompted furtherremarks from the central bank:

  • *BANK OF RUSSIA CONDUCTS INTERVENTIONS IN LINE WITH FX POLICY
  • *BANK OF RUSSIA INTERVENES ONLY AT EDGE OF RUB FLOATING CORRIDOR
  • *BANK OF RUSSIA: TIGHTENING HASN'T YET OFFSET IMPACT OF WEAK RUB