Risk increasing for a RUB float before long - watch out

The RUB right now - a guiding light for further financial market developments.

The RUB is approaching the 36.00 level in USD/RUB, reaching 35.45 so far today. 36.00 is the ish Usd/Rub level the CBR will have to defend. 41.00 is the corresponding basket level.

With the remaining FX reserves down to 365 BN Usd as of 23 Jan, the CBR will need to manage it tightly in order to avoid sliding below the 200 BN Usd mark.

There will not be much logic in using the remaining reserves to feed speculators instead of focusing on domestic needs. It would be a loosing battle. As the oil price remains depressed and an increasing number of Russian citizens and Corporates realises what is about to happen, the pressure will increase further.
I expect the RUB to float before long and am long Usd/Rub.

On the back of this I expect severe repercusssions in the CEE countries(which are already very vulnerable), the Ukraine and the Baltics. A floating RUB will risk cracking the Baltic pegs.
I remain short banks with exposure to the Baltics.
I have added to my long Nok/Sek.


With Jean Claude "rearview mirror" Trichet in Davos, declaring the ECB not willing to cut rates below "a certain level" in order to keep ammunition dry and fend off future economic weakening, the ECB have declared themselves followers of the 1990;s "Japan strategy". Further on, the ECB has also asked the European Banks to use raised equity to lend. With banks wanting to shrink their balance sheet and very aware of not loosing their credit ratings, this is not something the banks are likely to adhere to. This is not good.
I have added to my short Eur/Usd, as the Usd is now the "antieuro".

Equity markets are up today. From what I understand, this is very much end of month "windowdressing related", thus we should see a heavy tone to equities at the start of next week.

With Japanese export collapsing and Japanese banks getting dragged into the financial crisis, I will expect Japanese repatriation flows towards fiscal year end to be particularly strong this year, dragging other assetmarkets with it and sinking the Euro in the process (as if it needed any further assistance).
FX intervention risk by the BOJ/MOF is increasing as the market is approaching 85.00 in Usd/Jpy, on its way to all time low of 80.00. Dont ask me where Eur/Jpy will be though, probably sub 100/105.

As always, good luck










The comments and posts published in this blog ARE NOT trading recommendations. They can NEVER be considered as trading calls or advices. If you decide to use the information offered here for your real trading it is at your own risk.

Trading on margin carries a high level of risk and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade you should carefully consider your investment objectives, level of experience and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
Errors and Omissions may occur.
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice."www.todaysmacrotrading.blogspot.com" will not accept liability for any loss or damage, including without limitation to, any loss of profit, which may arise directly or indirectly from use of or reliance on such information.

© 2008 "www.todaysmacrotrading.blogspot.com:The traders blog" All Rights Reserved.