The CB and the Government divert banks from being bullish
Traders yesterday fell a few kopecks short of testing the Central Bank's promise to keep the national currency at the level of 41 roubles for a two-currency basket. Trading at MICEX closed yesterday with the dollar at 36.2 roubles, but the Central Bank was unperturbed. And indeed, nobody chose to attack the rouble, which has approached the announced limit, and it is even less likely today: Prime Minister Vladimir Putin explained the day before that the issues of additional capitalisation of banks and currency speculation would be linked.
No battle royal occurred between the market and the Bank of Russia, which could have been forced to make currency interventions today to protect the rouble and keep it at 41 roubles for the $0.55 + euro 0.45 basket. MICEX trading began with a dip of the dollar, which cost 36.22 roubles at the end of trading yesterday, to a little below 36 roubles per dollar. It is unknown whether the dollars were sold by the Central Bank or a major player leaving the dollar position, but several minutes later the rouble began to fall as fast as in the whole period since January 22, when the CB set a limit to the possible drop of the national currency. However, the players did not manage to provoke the Central Bank into joining the trading. In the afternoon the basket in the trading reached 40.9 roubles, but it did not overrun the announced level. No CB presence in the market was noted except that at 4 p.m. the players did not rule out that the regulator's stepping in with an offer of about $1 billion, but that hardly affected the exchange rate (the currency trade will amount to about $17 billion).
As a result, the Bank of Russia's offer - the level at which the CB would protect the rouble at all costs - will be determined today. The CB even permitted itself to be a little extravagant by strengthening the dollar, which is rising against the euro by 4 kopecks (to 36.13 roubles per dollar) and weakening the euro by a symbolic 1 kopeck. The market is mystified by the reasons that prompted this demonstration, but it is anyway a flash in the pan. The main question - the rate of the basket and the CB tactics - was left until today.
Even if there are major players in the market prepared to play against the CB and the rouble in the open, they are hardly able to do so at present: analysts attribute the absence of the regulator from the market to the fact that the Central Bank under Sergei Ignatyev is controlling the exchange rate not so much through dollar and euro sales as through offers of roubles to banks. Although there is still not much rouble liquidity in the market credit rates yesterday continued to slide while remaining fairly high: the MosPrime rate for the month was 23.25% on an annualised basis. The banks that might be interested to continue the attack on the rouble are afraid not only of being denied refinancing but also of being denied long-term state support. Vladimir Putin issued another warning yesterday: The money the state allocates to the banks must not go into the currency market. The fact that the warning was made at a conference on recapitalisation of the banking system is particularly significant: Over several days such players as Gazprombank and Alfabank are unlikely to take risks, and the Central Bank will be up against only foreign banks and Russian clients of the banking system which hedge devaluation risks. Today the Central Bank will mainly struggle against their plans.
Dmitry Butrin
