The Russian rouble fell to a record low against the
dollar as investors fear further sanctions against the nation.
The rouble fell to 37.03 per dollar on Friday, its
worst valuation since the currency was restructured in 1998.
The tumble comes weeks after Russia's central bank
pledged to intervene less in the currency's valuation.
It also follows peace talks in Minsk between
Ukrainian President Petro Poroshenko and Russian President Vladimir Putin in Minsk.
The market may have found the talks
"disappointing" and renewed its concern over sanctions, said Manik
Narain, emerging market strategist at UBS.
A recent weak economic performance and the conflict
with Ukraine have combined with Moscow's commitment to intervene less with the
value of the rouble, said Mr Narain.
Russia's central bank said earlier this month it
would abolish from next year a so-called trading corridor, which limits its
swing in value against currencies such as the dollar and euro.
Russia has more than $400bn of foreign currency
reserves. When its currency is weak, it can spend dollars to purchase roubles
in the market to shore up the value, he said.
In addition, Russia's weakened economic performance
and its reliance on commodities such as oil and gas mean it may be less willing
and able to do so, in addition to its commitment to a freer market for the
rouble.
Preliminary gross domestic product data released
earlier this month showed the economy growing by 0.8% in annual terms in the
second quarter of 2014, compared with 0.9% in January-March.
Ilan Solot, emerging markets currency strategist at
Brown Brothers Harriman in London said the reduced currency restrictions from
Moscow were "bold but shows their commitment" to a freer market and
may be a signal they want to be "seen as relaxed".
Ukraine's currency, the hryvnia, which itself hit a record
low of 13.65 per dollar earlier in the week, strengthened to 13.61. Because the
currency is less-broadly traded than the rouble it is more difficult to say why
it moves, said Mr Solot.
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