Well just a quick update of what has been happening this week:
USDRUB has been trading in a range of 2000 points at the start of the week. The Ruble has been slowly falling in the past few month and dropped about 1200 points. USDRUB has been trading around 35-36 for most of the year after being stable at around 30-32 for year prior to that. In September it has broken through the 37 barrier and has been slowly but surely going higher all the way up to 60 where it opened this coming Monday. Now that was already a quite big devaluation of the Ruble in the past year…from around 32 on the opening of 2014. There were many factors like Ukraine, Sanctions and Oil prices which has supported that. This week when it opened though it went quite mad frankly. It just started falling and falling doing 2000 points in the next 17 hours. That is around the numbers it did in the year and something is hasn’t done ever since the new Ruble started trading in 2009.
So here is some of the things that have happened this week in Russia:
After Ruble went crazy without any headlines and Moscow was past midnight the headline that Russia hikes key rate to 17% came out. That was when the ruble was trading at around 66 (I will not bother talking decimal places as it is not relevant considering how mental it was going). It dropped back down bellow 60 to around 58. Now it seems like it is normal the way we are talking but it is 800 in one hour, something the ruble hasn’t done for years prior to 2014. The rate hike was short lived and the ruble went back up to around 66 in the next two hours. It stayed there for an hour before in the next three went up another 1200 points towards around 79. Now you can imagine that it was doing similar things against other currencies going close to 100 against the EUR and obviously smashing that and going to 120 against the pound.
After that it started falling with crazy volatility doing around 1000 points up and down during some hours and went all the way back down bellow 60. The raising oil prices must have also had a helping hand in the ruble rally/recovery. It has traded in ONLY a 500 point range after that and during the Putin press conference today.
Now don’t forget that the rate hike now was from 10.5% to 17% but just a few month ago it was around 8% and we went into 2014 with it being even lower. From 2003 till 2014 the average interest rate in Russia was about 6.5%. It was the 6th rate hike in Russia in 2014. So this year Russia has hiked its rate from 5.5% to 17%
Most brokers have stopped trading the ruble until further notice. Ones who have not have about 100 points on USDRUB and 140 on EURRUB.
There were also the following headlines:
- RUSSIAN CENTRAL BANK FIRST DEPUTY GOVERNOR SAYS CENTRAL BANK WILL TAKE MORE MEASURES AFTER RATE HIKE
- Minister of Finance says that the Ministry is not planning capital controls.
- RUSSIA’S FINANCE MINISTRY STARTS SELLING ITS FX ON MARKET
- The FinMin has said it is ready to sell around USD7bn and that it will sell for as long as needed.
- RUSSIAN CENTRAL BANK SAYS WILL TAKE MEASURES TO SUPPORT FINANCIAL STABILITY
- RUSSIA C.BANK SAYS IMPOSES TEMPORARY MORATORIUM ON REVALUING BANK’S PORTFOLIO OF SECURITIES
- RUSSIAN CENTRAL BANK SAYS PLANS TO HOLD ADDITIONAL FX AUCTIONS FOR NEW TIME PERIODS IF NECESSARY
- RUSSIA CENTRAL BANK SAYS TOGETHER WITH GOVT IS PREPARING MEASURES TO PROVIDE BANKS WITH ADDITIONAL CAPITAL IN 2015
Now as I mentioned there was also Putin press conference but that seems as a non-event for the economics regarding everything that has happened. There was this little nugget in there though:
Putin invites Evtushenkov for a meeting and says Sistema contributed a lot for Russian Market. – Sistema shares +127%
Here are some things regarding the Russian Market during this week:
Today (18.12.14) – that is a few hours ago (situation changes every minute in Russia now)
- Russian Market +8.48%
- Sistema shares +73%
- Rosneft +12.50%
- Gazprom +8.26%
- Magnit +19%
Today morning (18.12.14)
- Russian Market +3.37%
- Sberbank +8.22%
- VTB +2.03%
- Sistema +39.12%
- Mail Ru +11%
- Lukoil +3.4% G
- Gazprom +3%
- Russian Stock Market +15%
- Gazprom +17%
- Lukoil +18.28%
- VTB +7.48%
- SBERBANK +41.93%
- Mechel +17.65%
- Sistema +23%
- Russian Stock Market – 15.04%
- Sberbank -17.77%
- VTB -14.29%
- Lukoil -6.89%
- Gazprom -10.7%
- Sistema -22%
- Surgut -17%
Regarding the economy a few hours ago Putin said during his press conference that it is not in crisis. That it will no doubt recover recover:
The current downturn in the Russian economy is provoked by external factors, mainly the slump in global oil prices. Russia’s budget, which is largely dependent on energy exports, is currently suffering from the sharp decline in oil prices. The Russian economy is now facing a backlash from Western sanctions that were imposed on Moscow due to its alleged involvement in the Ukrainian crisis, although Moscow has repeatedly denied such claims.
The Economic situation in Russia may start improving already in the first quarter of 2015. “I said that even given the most unfavorable internal market condition this situation may last for about two years … But the situation may start improving even earlier … in the first, second quarter, in mid-2015 or at the end of the next year. No one can say for sure,” Putin said during a press conference.
The Russian economic recovery will take two years at worst. “If the situation takes a negative turn, then we will have to introduce some amendments to our plans. Naturally, something will have to be trimmed. However, I would like to stress that a “positive rebound,” as experts call it, and subsequent growth are inevitable under present circumstances,” the Russian leader told reporters.
Putin expressed hope that the ruble would continue to strengthen again foreign currencies. The Russian authorities are planning a series of measures that proved successful back in 2008.
Putin also urged the Central Bank to act faster in order to overcome the current economic slowdown. “Their actions need to be coordinated, collective and prudent, but without interference into the Central Bank or the government’s sphere of competence. Nevertheless, there must be coordination and it must be timely,” Putin said.
Russia’s Central Bank needs to hike key rates in order to stabilize the country’s macro-economy. In an effort to halt the devaluation of the national currency the Russian Central Bank on Monday raised its key interest rate from 10.5 percent to 17 percent.
So a fun week in Russia all in all. Hope you enjoyed it.
Have a good end of the week, good luck, Merry Christmas, Happy New Year and whatever else any of you might celebrate.
Over and out.