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China Prepares To Bailout Russia | Zero Hedge
China Prepares To Bailout Russia | Zero Hedge.
Earlier this evening China’s State Administration of Foreign Exchange’s (SAFE) Wang Yungui noted “the impact of the Russian Ruble depreciation was unclear yet, and, as Bloomberg reported, “SAFE is closely watching Ruble’s depreciation and encouraging companies to hedge Ruble risks.” His comments also echoed the ongoing FX reform agenda aimed at increasing Yuan flexibility which The South China Morning Post then hinted in a story entitled “Russia may seek China help to deal with crisis,” which which noted that Russia could fall back on its 150 billion yuan ($24 billion) currency swap agreement with China if the ruble continues to plunge, that was signed in October. Furthermore, two bankers close to the PBOC reportedly said the swap-line was meant to reduce the role of the US dollar if China and Russia need to help each other overcome a liquidity squeeze.
As Bloomberg reported, earlier in the evening, China’s Wang Yungui noted
- *CHINA IS CLOSELY WATCHING RUBLE’S DEPRECIATION: SAFE’S WANG
- *CHINA ENCOURAGES COS. TO HEDGE RUBLE RISKS, SAFE’S WANG SAYS
- *REAL IMPACT OF RUBLE DEPRECIATION UNCLEAR YET, SAFE’S WANG SAYS
Adding that China plans sweeping reforms to promote FX flexibility.
And then The South China Morning Post hints,
Will Putin’s Next Step Be To Sell Gold? | Zero Hedge
Will Putin’s Next Step Be To Sell Gold? | Zero Hedge.
“Russia is at a critical juncture and given the sanctions placed upon them and the rapid decline in oil prices, they may be forced to dip into their gold reserves, if it happens it will push gold lower.” That is what, according to some people Bloomberg has quoted, is in the cards.
Russia’s surprise interest-rate increase failed to stop the plummeting ruble. Another tool available to repair economic havoc caused by sanctions and falling oil prices: selling gold.
Russia holds about 1,169.5 metric tons of the precious metal, the central bank said last month. That’s about 10 percent of its foreign reserves, according to the London-based World Gold Council. The country added 150 tons this year through Nov. 18, central bank Governor Elvira Nabiullina told lawmakers. The Bank of Russia declined to comment on its gold reserves.
Russia’s cash pile has dropped to a five-year low as its central bank spent more than $80 billion trying to slow the ruble’s retreat. The currency’s collapse combined with more than a 40 percent tumble in oil prices this year is robbing Russia of the hard currency it needs in the face of sanctions imposed after President Vladimir Putin’s annexation of Crimea. A fall in gold prices signals that traders are betting that the country will tap its reserves, according to Kevin Mahn, who oversees $150 million at Parsippany, New Jersey-based Hennion & Walsh Asset Management.
“Russia is at a critical juncture and given the sanctions placed upon them and the rapid decline in oil prices, they may be forced to dip into their gold reserves,” Mahn said. “If it happens it will push gold lower.”
But others are less convinced.
Western Banks Cut Off Liquidity To Russian Entities | Zero Hedge
Western Banks Cut Off Liquidity To Russian Entities | Zero Hedge.
As Zero Hedge first reported today, shortly before noon one (and subsequently more) FX brokers advised clients that any existing Ruble positions would be forcibly closed out because “western banks have stopped pricing USDRUB“, over concerns of Russian capital controls. Ironically, it was this forced liquidation of mostly short RUB positions that pushed the RUB higher, which in turn had a briefly favorably impact on energy commodities and risk assets, as the market had by then perceived the Ruble selloff as excessive. Of course, since nothing had actually changed aside from a temporary market technical, the selloff promptly resumed into the close of trading once the market finally understood what we had explained hours previously.
And unfortunately for the bulls, various falling knife-catchers, and those who hope the Russian situation will stabilize imminently with or without capital controls, it appears things in Russia are about to get a whole lot worse because as the WSJ reports, the next driver of the Russian crisis is likely to come from within the banking system itself because “global banks are curtailing the flow of cash to Russian entities, a response to the ruble’s sharpest selloff since the 1998 financial crisis.”
Presenting Russia’s banks: now cut off from the outside world as the second cold war goes nuclear, at least when it comes to the financial system:
Hedge Fund Manager Who Remembers 1998 Rout Says Prepare for Pain – Bloomberg
Hedge Fund Manager Who Remembers 1998 Rout Says Prepare for Pain – Bloomberg.
Stephen Jen landed in Hong Kong in early January 1997 as Morgan Stanley’s newly minted exchange-rate strategist for Asia.
He was soon working around the clock when investors began targeting the region’s currency pegs, first felling Thailand’s in July. The rout spread through Asia before rocking Brazil andRussia. It led to the collapse of Long-Term Capital Management, an event that introduced the Federal Reserve-brokered bailout.
If the 48-year-old native of Taiwan, with a PhD from Massachusetts Institute of Technology, sounds a little jaded now, it’s not without some reason. He says he worries that many emerging-market analysts are too young to remember the late 1990s. Instead they learned the ropes in an era dominated by the rise of Brazil, Russia, India and China — a supposed one-way bet to prosperity.
“Many became EM specialists after the term ‘BRIC’ was coined in 2001 and don’t know any serious crisis,’’ says Jen, who now runs the London-based hedge fund SLJ Macro Partners LLP.
Russia Prepares For GDP Surge As Consumers Scramble To Spend Their Plunging Rubles | Zero Hedge
Russia Prepares For GDP Surge As Consumers Scramble To Spend Their Plunging Rubles | Zero Hedge.
In the most ironic twist of all amid the “currency crisis” enveloping Russia, we suspect the world’s central bankers will be looking on jealously as The CBR manages to achieve precisely what The BoJ and The Fed are desperate to achieve. In raising inflation expectations, The FT reports, Russians arehurriedly turning their depreciating Rubles into jewelry, furniture, cars, and apartments as the currency’s collapse prompts a shopping spree that will likely lead to a surge in GDP. As one anxious shopper noted, “none of us know what’s happening. We’re all worried that the currency will keep falling,” and so “it’s time to buy furniture!” And sure enough, shopping centers are currently experiencing a spectacular rush.
Russians hurried to change their savings and pensions into dollars and euros while also stocking up on furniture and jewellery as the rouble’s collapse accelerated.
Their mounting concern was reflected on Tuesday morning in the red lights of the currency exchange booths that dot the city, which were ticking over to show ever weaker rouble rates.
…
“I took out some of my pension and I want to change it into dollars,” said Galina, a retiree, who declined to give her surname. “None of us know what’s happening. We’re all worried that the currency will keep falling.”
Turmoil Spreads: Ruble Replunges, Crude Craters, Yen Surges, Emerging Markets Tumbling | Zero Hedge
Turmoil Spreads: Ruble Replunges, Crude Craters, Yen Surges, Emerging Markets Tumbling | Zero Hedge.
For those wondering if the CBR’s intervention in the Russian FX market with its shocking emergency rate hike to 17% overnight calmed things, the answer is yes… for about two minutes. The USDRUB indeed tumbled nearly 10% to 59 and then promptly blew right back out, the Ruble crashing in panic selling and seemingly without any CBR market interventions, and at last check was freefalling through 72 74, and sending the Russian stock market plummeting by over 15%.
It is so bad, US equity futures which had jumped earlier on hopes of more Chinese intervention following the latest disastrous Chinese PMI print, as well as a French manufacturing PMI beat (don’t laugh), are back to unchanged.
The latest rout continues to be driven by the relentless plunge in Brent which also continued crashing overnight to fresh 5 year lows, sliding decidedly under $60 as WTI dropped well under $55 as well. And as we previewed over a month ago, it is not just Russia, but every single petroleum exporting country that is suddenly seeing a currency crisis, and spreading to all EMs with the Indian Rupee weakening the most since 2013, Indonesia lowering the Rupiah’s reference rate by the most on record, and so on. Ironically, this happens as the USDJPY is also crashing and dropping moments ago to 116.25, the lowest level since mid-November. At this rate the Fed will have no choice but to intervene, however in the opposite direction, and admit that despite all its best intentions, the US can not decouple from the rest of the world and a rate hike – so very priced in by everyone – is just no going to happen in the coming years (which sadly means that the latest subprime debt driven “recovery” is about to be called off).
Ruble Freefall: And the Ugliest Currencies Are? | Wolf Street
Ruble Freefall: And the Ugliest Currencies Are? | Wolf Street.
The 35% plunge of the price of oil since June and the sanction spiral imposed on Russia are wreaking havoc on the ruble. Oil and gas revenues are crucial to the finances of the Russian government and to the oil-and-gas dominated economy. So the ruble continues its free-fall that started in June. It hit a new low of 50.21 rubles to the dollar. Down 33.55% year to date, and down 32% since June.
After the collapse of the Soviet Union, the ruble got wiped out completely. When I went to Russia for the first time in 1996, it traded for 5,000 rubles to the dollar and was falling so fast that all prices were denoted in dollars and payable in rubles at the exchange rate of the day, which every Russian knew. By 1998, during the “ruble crisis,” Russia defaulted on its debt and devalued to ruble to where it lost practically all its value from just a few years earlier. A process no Russian will ever forget.
The distrust in the ruble as a store of value has been so ingrained that chitters in the world incite Russians to dump their rubles for dollars and euros. Their distrust goes far beyond the distrust many Americans have in the dollar!
This chart shows the ruble’s dual collapse against the dollar since 2003:
Ukraine Currency Crashes After Senior EU Official Says “The Ukrainians Are Manipulating Us” | Zero Hedge
The much discussed tumble in the Russian ruble (or as Japan would call it “mission accomplished” if its was the Yen instead of the Ruble) may have stabilized somewhat, and judging by the Russian central bank’s response to no longer intervene in the FX corridor-setting market on a daily basis, Russia is hardly too concerned by the impact to the economy as a result of the beating its currency has taken, but where Putin may have brushed off the “speculative” attack on its currency for the time being, things for Russia’s western adversary, the Ukraine – the country whose economy is in a state of near terminal collapse and which unlike Russia doesn’t have massive raw materials to fall back on – are just starting to go bump in the night.
As has been the case for nearly a year, the Ukraine has been on life support by its “western allies” ever since the Victoria Nuland/US State Department/CIA catalyzed coup early in the year. The problem is that those same “allies” now look like they have had enough of their “alliance” and are about to pull the “blank check” rug.
According to Reuters, nearly a year on from the first “EuroMaidan” protests that would topple the pro-Moscow president who had spurned an EU trade deal, some in Brussels are disillusioned by the experience of helping Ukraine. EU generosity in waiving import duties and funding gas supplies from Russia may be being abused, they say.
Corruption in Ukraine? Unpossible. But wait, it gets better:
…click on the above link to read the rest of the article…
