• ACI Russia

08/27/1998 11:53:02 FOCUS-Rouble exchange trade suspended in Moscow

By Karl Emerick Hanuska

MOSCOW, Aug 27 (Reuters) - Russia's central bank suspended

all rouble foreign exchange trade on the Moscow Interbank

Currency Exchange (MICEX) on Thursday, bourse officials said

after opening trade showed the currency headed for a sharp drop.

Trade across the country was sparse with banks and exchange

booths on the street equally unwilling to part with dollars and

other hard currency.

Traders at MICEX on Thursday had bid 8.2 roubles to the

dollar against offers of 9.5 roubles, while the central bank had

set its official daily rate, and the starting rate for exchange

trade, at 7.86 roubles to the dollar.

On the St Petersburg Currency Exchange, a regional exchange

much smaller than MICEX, the dollar was trading at 9.5 roubles,

on turnover of only about $17 million, compared with 8.24

roubles to the dollar on Wednesday.

The central bank also cancelled MICEX dollar trade on

Wednesday, when the rouble looked poised for a slide, but

allowed trade of secondary curencies, including the mark,

against which the rouble fell 40.8 percent to fix at 7.6 per


MICEX said trade on its electronic SELT system, which

handles much lower volumes than the main exchange, would

continue on Thursday.

The MICEX trade would have led to a fix, the best indication

of rouble value in an extremely thin and nervous market. But

there has been no dollar-rouble fix for two days due to central

bank orders.

Demand for dollars exceeded offers on MICEX by $290 million,

the exchange said before the central bank suspended trade.

Banks on the SELT system were bidding to buy dollars for

settlement at rates of 11.1 roubles to the dollar.

The rouble was at around six to the dollar only two weeks

ago, before the central bank announced a de facto devaluation by

raising the upper band of its official corridor to 9.5 to the

dollar from 7.13 previously.

The currency's fall has prompted large numbers of Russians

to convert their savings into safe-haven dollars if they are

able to find banks selling them.

But retail trade of the currency has shut down in points

across the nation, beginning with far eastern Vladivostok.

Some stores have closed down as they puzzle over what prices

to set.

The central bank vowed on Wednesday it would no longer

intervene heavily on the foreign exchange market as it was

virtually the only seller of hard currency for roubles.

It said it had spent $8.8 billion in July and August to prop

up the rouble. Its gold and hard currency reserves had fallen to

a two-year low of $13.4 billion on August 21 from $15.1 billion

a week earlier.

The bank said its remaining reserves are needed to meet the

urgent needs of the government and suport a minimal level of

critical imports.

Some analysts have said the central bank's effective

reserves are only worth about $6 billion as much of its reserves

are highly illiquid.

((Moscow Newsroom, +7095 941-8520


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