Ruble hits two-month high versus Euro on debt woes in Russia
MOSCOW: The ruble climbed to its strongest level against the euro in two months as the prospect of higher interest rates and a worsening of Europe's debt crisis lured investors to the world's largest energy exporter.
Russia's currency added as much as 0.9 percent to 40.79 per euro, its strongest intraday level since Sept. 21. It weakened 0.2 percent to 31.4050 per dollar by 1:23 p.m. in Moscow, after earlier gaining to 31.2775.
Bank Rossii may raise its record-low benchmark borrowing costs by 1.31 percentage points over the next six months, according to forward rate agreements tracked by Bloomberg, after the central bank's First Deputy Chairman Alexei Ulyukayev yesterday indicated key rates may rise over the coming months. The euro slumped against most of the 25 emerging-market currencies tracked by Bloomberg today amid speculation Ireland's bailout for its debtridden banking sector may have to be expanded to other European nations.
"All this speculation about Europe is weighing on the euro and people are selling it against almost everything, including the ruble," Ivan Tchakarov, chief economist for Russia and the former Soviet Union at BofA Merrill Lynch Global Research, said by phone in Moscow. "The subtle change in rates outlook is also a marginal driver" of the currency, he said.
The ruble strengthened for a second day against the dollareuro basket used by Bank Rossii to temper swings in the currency that disadvantage exporters. It gained 0.3 percent to 35.6551 versus the basket, which is made up of about 55 percent dollars and 45 percent euros.
Investor concern has shifted to Spain and Portugal since Ireland was offered an 85 billioneuro ($111 billion) bailout package by the European Union and International Monetary Fund. Spanish 10-year dollar debt has slid for the past 11 days, pushing the yield to a 10-year high. Portuguese 10-year bonds yielded the most since at least 1997 today. The euro hit a two-month low against the dollar.
Bank Rossii didn't include the "for the coming months" qualifier it has included in previous announcements in its statement Nov. 26 announcing key interest rates would remain on hold for the fifth straight month. This omission shows the Moscow-based regulator now "has a free hand" when it comes to borrowing costs and "isn't confident" rates will remain on hold in the months to come, Ulyukayev said at a conference in Munich, according to the RIA Novosti news service.
Bank Rossii may raise rates to curb inflation as soon as next month, Vladimir Osakovsky, chief Russia economist in Moscow at UniCredit SpA, said in a research note emailed yesterday. Higher rates would bolster Russia's appeal as a destination for the carry trade, where investors borrow funds in countries with lower rates of interest and invest them in places where the returns are higher. -PB News
ISLAMABAD: Ambassador of Turkey called on Federal Minister for Education Sardar Aeff Ahmad Ali. -App