- 2-hour bourse shutdown halted stocks, ruble, bonds trading
- Citi says Friday cut would be `massively' negative for ruble
The ruble strengthened for the first time in six days as crude oil rebounded and investors bet on a pause in the Bank of Russia’s rate-cutting cycle. Equipment failure on the main bourse in Moscow knocked out currency, stocks and bond trading for two hours.
The Moscow Exchange switched to backup systems after the shutdown at about 3 p.m. in Moscow, the latest in a string of interruptions this year. When trading resumed, the ruble continued its advance, appreciating 1.6 percent to 68.0490 against the dollar by 7:15 p.m. in Moscow, the biggest rally among emerging markets tracked by Bloomberg. Oil surged 4 percent in London, helping lift the Micex index of stocks to a second day of gains.
The ruble is getting some relief as the biggest currency slump in emerging markets this quarter raises the odds that Bank of Russia Governor Elvira Nabiullina will end a string of five interest-rate cuts and keep the borrowing benchmark on hold at Friday’s meeting. The ruble has slumped 28 percent since closing at a six-month high on May 18, as oil, Russia’s main export earner, declined and China’s surprise devaluation of the yuan roiled global financial markets.
“Under the baseline of no move, one can assume it will be neutral to mildly positive for the ruble,” Ivan Tchakarov, economist for Russia at Citigroup Inc. in Moscow, said in e-mailed comments. “If for some reason they cut, which is unlikely, it will be massively negative for the currency.”
The currency’s plunge against the dollar sent inflation back to 15.8 percent in August, approaching the 11-year high of 16.9 seen in March and almost four times above the central bank’s 4 percent target. Brent crude, the benchmark used to price Russia’s main export blend, rose 2.2 percent to $48.68 a barrel today.
All but two of 33 polled analysts expect the central bank to leave the key rate unchanged at 11 percent at its next meeting on Sept. 11 after cutting it by 600 basis points since the beginning of the year.
The benchmark still remains half a percentage point short of a full rollback of an emergency increase in December. Forward-rate agreements are signaling 50 basis points of increases in borrowing costs during the next three months, near the highest this year, according to data compiled by Bloomberg.
“Oil will continue to play a key role in the ruble’s future," said Artem Roschin, a currencies dealer at Aljba Alliance bank in Moscow.
By 5:15 p.m., ruble trading had resumed. The halt is a setback for Russia’s biggest exchange as it seeks to lure foreign and local investors to the Moscow trading platform. The last interruption on the Moscow Exchange was on Aug. 12 when derivatives trading was halted. In March, the exchange stopped currency and precious-metals transactions for more than an hour.