Russia’s rouble fell more than 1 percent versus the dollar on Tuesday, reversing most of the previous day’s gains, while emerging equities and most other currencies also lost ground as oil prices slid.
Emerging stocks slipped 0.3 percent following a weaker close in China where markets earlier hit three-year highs in record trading volumes as investors jockeyed for position ahead of next week’s Shanghai-Hong Kong trading tie-up. The pilot scheme will allow investors in the two markets to trade in each others shares, opening up access to mainland Chinese shares.
Moscow-listed dollar-denominated shares eased 0.8 percent whilst rouble-denominated stocks rose.
The rouble meanwhile resumed its slide, a day after the Russian central bank allowed it to float and warned it could intervene without warning to squeeze out speculators.
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The fall in oil, corporate demand for dollars and claims that Moscow had sent in tanks and troops to eastern Ukraine were all dragging on the currency.
“The central bank moving to a free float had given a bit of support to the rouble. That seems to have faded a bit, I guess on concerns about renewed tensions in Ukraine and escalation of the conflict there,” said Neil Shearing, head of emerging markets research at Capital Economics.
“Our judgment is the fall in the rouble … doesn’t need to go much further. But we know that currencies have a tendency to overshoot in crisis.”
In Ukraine, the hryvnia was flat after Monday’s 5 percent fall, triggered by fears of a fresh flare-up in military tensions, while five-year credit default swaps eased from the Monday’s high of 1,343 basis points, according to Markit.
Ukraine’s dollar bonds also fell 0.5-1.0 cents in the dollar after news of sharp falls in hard currency reserves that make a debt restructuring likely.
Oil prices were also having an impact on Nigeria, where the naira fell half a percent after Monday’s 1.5 percent loss , although Nigerian stocks bounced 0.8 percent after hitting 21-month lows.
The Hungarian and Romanian currencies weakened slightly, the latter pulling off two-week highs, as inflation data underpinned rate cut expectations .
Hungarian shares hit new three-week highs, however, thanks to the authorities’ decision not to clobber banks with the cost of converting retail hard currency loans into forints.
The Serbian dinar stayed just off record lows hit on Monday against the euro. The central bank is expected to keep interest rates on hold on Thursday as it negotiates with the International Monetary Fund for a loan.
Earlier, the won fell 0.7 percent on expectations the central bank would step in to weaken it amid an ongoing slide in Japan’s yen, the currency of South Korea’s main export rival.
