October 30, 2014 / 7:33 AM / 4 years ago

UPDATE 4-Rouble jumps as nervous market looks to central bank meeting

* Rouble moves 3 pct higher vs dlr in nervy trade

* Traders cite report on agreement over Crimea

* Analysts say central bank could have intervened

* C.bank rate meeting on Fri, market expects rate hike (Adds Bashneft, detail)

By Alexander Winning and Yelena Orekhova

MOSCOW, Oct 30 (Reuters) - The rouble jumped over 3 percent on Thursday, bouncing off an all-time low against the dollar amid market talk of possible heavy central bank intervention ahead of a monetary policy meeting and rumours of a deal with Ukraine over Crimea.

With nerves jangling before Friday’s meeting, when decisive central bank action is expected to stem a steep slide in the currency and combat rising inflation, market players struggled to pin down the underlying cause of the sharp upward move.

Traders in Moscow and London said the rouble’s recovery was driven by a report by Ukraine’s UNIAN agency that President Vladimir Putin and Ukrainian President Petro Poroshenko may have reached an unofficial agreement on the future status of Crimea.

Putin’s spokesman cast doubt on the report and analysts described it as unconvincing. It followed a television interview by a little-known Ukrainian diplomat expressing his personal opinion.

Other explanations for the rouble jump, analysts and traders said, was that the central bank was intervening heavily to support the rouble, traders were positioning for a rate hike on Friday, or that a breakthrough in Russia-Ukraine gas talks could be around the corner.

By 1445 GMT, the rouble was 3.14 percent stronger against the dollar at 41.84 after earlier reaching a new all-time low of 43.66 against the greenback.

The Russian currency jumped as much as 5 percent at one stage, its largest move in several years, before falling back after a Russian court approved prosecutors’ request to seize shares in the Bashneft oil producer. The Bashneft case has deepened investor fears that the Kremlin wants to reclaim prized assets.

“UNIAN report of Putin-Poroshenko agreement over future status of Crimea. My response - no way Jose, not a chance in hell,” Tim Ash, chief emerging markets analyst at Standard Bank in London, wrote in a note.

“There was a large offer to sell forex, about $1 billion, on the market and after that the exchange rate turned around. I suspect the central bank did this to see how many people were sitting with long positions (in forex),” said a trader at a large investment bank in Moscow.

“The whole market expects the key rate could be raised by 50-100 basis points (bps), but the central bank could well raise it straight away by 150-200 bps,” the trader said.

The central bank declined to comment.


The rouble was 3.35 percent stronger at 52.80 versus the euro. It was 3.25 percent stronger at 46.77 against the dollar-euro basket the central bank uses to gauge the rouble’s nominal exchange rate.

Dmitry Polevoy, chief Russia economist for ING Bank in Moscow, said the market had been heavily betting on the rouble to weaken. “Therefore it doesn’t take much for people to rush to close their long positions in the dollar,” he said.

The rouble has lost around 20 percent of its value against the dollar this year. The currency has been weakened by falling oil prices, risk aversion towards Russia because of its conflict with Ukraine, and demand for foreign currency from Russian companies shut out of Western capital markets.

The central bank has spent at least $25 billion defending the rouble this month and more than $65 billion since the start of the year. Daily interventions of $2 billion to $2.7 billion have been typical in recent days.

The market expects the central bank to raise its key rate on Friday for the fourth time year. Some analysts believe the bank could also alter its interventions policy to let the rouble float freely ahead of schedule.

A debut auction of forex repos by the central bank on Wednesday, intended to support the rouble and address a shortfall of dollars among Russian companies, met with lacklustre demand. Another auction on Thursday also met with meagre demand.

For rouble poll data see

For Russian equities guide see

For Russian treasury bonds see

Russia in graphics: link.reuters.com/dun63s (Additional reporting by Lidia Kelly and Yelena Fabrichnaya in Moscow and Sujata Rao in London; Editing by Dominic Evans)

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