Russia,the Usd and deleveraging

Russia has spent 111 Bn Usd on supporting the RUB since August. CBR now has 91 BN Usd left.

Yesterday they spent another 7 BN Usd. This is clearly not a viable situation. CBR has decided to let the RUB weaken slowly but surely, in a controlled fashion. The risk is that this gets out of control. In any case, commodity prices are low, current account surpluses are changing signs, FDI (Foreign direct investment) is falling, Russian corporates having funded themselves in hardcurrency to the tune of 400BN Usd, a steady outflow of "hot money" as well as "real money" and youve got a receipe for trouble. This in turn will trigger hard currency buying which should boost the USD. On top of that, unless IMF and CEE (Central Eastern European Countries) and other countries with twin deficits get financial support soonish, we will most likely have another round of global forced asset selling (due to deleveraging) on our hands. Nobody wants that. Expect hard efforts to raise further funds for the IMF by G20 government heads. Emerging markets, and especially twin deficit countries hold the key here.

Ceteris paribus, expect further pressure on CEE, TRY, ZAR, CAD and Euro currencies from here towards the October lows, and a stronger USD, CHF and JPY. This also implies that the speed of the Baltic countries crisis is also increased. More on this at another time.