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EMEA Weekly: Week 12‏

Published 03/14/2014, 07:13 AM
Updated 05/14/2017, 06:45 AM

The Russian rouble continues to slide despite Bank Rossii's USD400m daily interventions as geopolitical uncertainties are not easing. As Bank Rossii unexpectedly hiked its key rates on 3 March 2014, money market rates have been rising fast and the FX swap curve moving up. For instance, immediately after the 150bp key rate hike, one-year interest rate (IR) swaps jumped 112bp to 8.725, easing some 40bp the day after.

Despite Russia's monetary authorities providing enough RUB liquidity to local banks, the markets fear any rigorous reaction (new rate hikes or even capital controls) of the central bank to mitigate RUB's rapid weakening. On 14 March 2014, Bank Rossii is holding its monetary policy meeting. The main pressure on the rouble and money market rates comes from geopolitical escalation around Crimea.

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