08/27/1998 09:23:51 INSTANT VIEW - Russia c.bank suspends rbl trade
MOSCOW, Aug 27 (Reuters) - Russia's central bank suspended
trade of the rouble against all currencies on the Moscow
Interbank Currency Exchange on Thursday after cancelling
rouble-dollar trade on Wednesday.
Traders on Thursday had bid 8.2 roubles to the dollar
against offers of 9.5 roubles to the dollar, while the central
bank had set its official daily rate, and the starting rate for
exchange trade, at 7.86 roubles to the dollar.
The central bank also said foreign exchange and gold
reserves had fallen to $13.4 billion on August 21 from $15.1
billion on August 14.
The rouble on Wednesday had slid over 40 percent against the
mark, fixing on MICEX at 7.600 roubles to the mark.
ECONOMIST AT MOSCOW-BASED INVESTMENT BANK
"It's delirium, that's what we call it. The central bank
says it will not sell dollars, at the same time it keeps the
previously announced official trading band, at the same time the
rouble effectively devalues against the mark so it breaks this
"An official rate exists but no-one uses it. The exchange
rate on the interbank currency market is 11 (roubles to the
dollar) and at 12-13 for deals to settle tomorrow, which is also
not within the trading band.
"No one really knows what's going on, this is the problem."
LAWRENCE AUSTEN, MFK RENAISSANCE INVESTMENT BANK, MOSCOW
"What is going on right now is that they are in the process
of making the rouble a non-convertible currency. Basically it is
a problem of the fact that there are no natural holders of the
rouble at the present. Why would there be? The rouble isn't much
good to anyone right now.
"It is clear that the central bank needs to do something
right now. This simply isn't sustainable. The central bank is
burning through their dollar reserves at an alarming rate...
"It is a good bet that they only have about $6 billion
dollars of actual usable reserves because a large part of their
reserves are in gold.
"The central bank has just two choices: they can let the
rouble go and the market will establish an appropriate rate --
but that might mean the exchange rate could go plummeting -- or
they can impose capital controls. That is in effect what they
are doing right now by cancelling trading. They (the central
bank) could wind up not having trading at all and scrap MICEX."
PHILIP POOLE, HEAD OF RESEARCH FOR EMERGING EUROPE, MIDDLE
EAST, ING BARINGS, LONDON
"The key issue is domestic sentiment... There are two
options: either you can provide some comfort to residents such
that they start to believe they should stay in roubles, which is
extremely difficult in the political vaccuum, or else you simply
close off access to foreign exchange and you do that by
suspending internal convertibility.
"That, I think, is the route that they will have to take.
"Once they've done that we have to have a resolution of the
underlying politcal problem.... Once that is then resolved, I
think it is only at that point will they be able to look
sensibly longer term at the exchange rate and decide what the
exchange rate policy should be and potentially look at options
like a currency board, for example, to try and put some faith
back into residents and ultimately non-residents in the rouble.
"If that is the route that they follow, then what will
happen inevitably and very quickly -- and I think it is already
happening -- is that the black market will develop. The black
market rate would probably be somewhere around 20 roubles to the
"There is a complete vacuum of power in Russia at this point
in time...that is ultimately at the root of this crisis and
that's progressively worsening the crisis on a daily basis.
Until it's resolved we're not going to find a way out of this."
JOHN LOMAX, EMERGING MARKETS ANALYST, HSBC INVESTMENT BANK
"What the government needs to do to get out of this muddle
and move toward a healthy economy is introduce a package of
concrete austerity measures that take a long-term approach to
the problems and strengthen the country's weak fiscal position
and financial sector.
"Fiddling around with montary policy is not the answer. The
banking sector is in danger of going belly-up and that would be
disasterous. To prevent that a full package of measures is
needed. Russia's banks are vital right now to solving the
country's tax problems. As the conduits through which payments
are made, they are key to solving the tax collections problems."
((Moscow Newsroom, +7095 941-8520