Ruble sinks, markets await U.S. jobs numbers

November 7
5:58 AM 2014

A deepening crisis of confidence in the ruble dominated financial markets action in Europe on Friday, with another 3 percent fall meaning the Russian currency has lost more than a tenth of its value in less than a week.

As investors await monthly U.S. jobs data, European shares edged higher, supported by signs on Thursday that the European Central Bank is edging toward providing more help for the moribund euro zone economy. The FTSE Eurofirst index of leading European shares was up 0.3 percent.

The ruble's slide -- and the broader problems around Ukraine and lower oil prices which it reflects -- are likely to put yet more pressure on exports by European companies already struggling with very poor demand at home.

With the currency battered by concerns about the conflict with Ukraine and the tit-for-tat sanctions that have resulted, Russia's central bank effectively gave up supporting its existing peg against the dollar earlier this week.

With intervention to support the rouble limited to just $350 million daily, a further slide is likely, traders said.

"This is full-blown panic, with signs of a self-fulfilling currency crisis," Dmitry Polevoy, chief Russia economist at ING Bank in Moscow, said in a note.

"At such times, the central bank should intervene -- after all, if this isn't a risk to financial stability, then what is?"

President Vladimir Putin held talks with top security chiefs on Thursday over a "deterioration of the situation" in eastern Ukraine after pro-Russian rebels there accused Kiev of launching a new offensive in violation of a ceasefire.

The dollar was worth 48.39 rubles in morning trade in Europe, compared to Thursday's close of 46.86 rubles.


Asian stock markets edged down overnight ahead of the U.S. employment numbers, due at 1330 GMT, while the euro wallowed around two-year lows after ECB President Mario Draghi vowed to take more steps to support growth in the euro zone.

Investors were likely to remain cautious ahead of the U.S. nonfarm payrolls report. Solid gains in employment are projected, which could increase speculation the Federal Reserve will raise U.S. interest rates in the middle of next year.

"The market is positioned for a big number," said Chris Weston, chief market strategist at IG Markets in Melbourne.

MSCI's broadest index of Asia-Pacific shares outside Japan was down about 0.2 percent, on track for a weekly loss of about 1.8 percent.

Japan's Nikkei stock average rose 0.5 percent, gaining 2.8 percent for the week following the Bank of Japan's surprise announcement of more easing steps on Oct. 31.

Japanese cabinet ministers expressed concern about the yen's recent rapid fall, suggesting that the government may be trying to ward off criticism that it is intentionally devaluing its currency to boost exporters' competitiveness.

The dollar bought 115.28 yen, not far from a fresh seven-year peak of 115.52 touched overnight. The euro inched up to $1.2398 after brushing a more than two-year low of $1.2368.

The stronger dollar and supply fears continued to pressure oil prices. Brent dropped about 0.4 percent to $82.55 a barrel, while U.S. crude had recovered from overnight losses to be a touch higher at $77.99.

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