The dollar falls to 2001 levels

YUKOS again drags the market downwards

This past week the dollar exchange rate fell by 26 more kopecks, and for the Friday holiday and the weekend, the Central Bank set a rate of 29.44 rubles to the dollar. On the world currency market the dollar also became substantially weaker, and the dollar rate versus the euro reached an all-time low. The Central Bank remained the sole purchaser of dollars. Its ruble interventions led to a notable increase in liquidity in the banking system. The short-term IBC rate did not rise above 2%, and correspondent accounts ranged from 152-164 billion rubles. “The stronger ruble is supported by high oil prices and subsequent massive sales of export revenue, as well as the dollar’s weak performance versus other leading currencies on the FOREX market,” says Andrei Danilin, Director of the Treasury at the Moscow Bank for Reconstruction and Development. “It seems that the potential for the exchange rate to continue falling is very high, and the dollar will continue to weaken further under the control of the Central Bank.”

The stronger ruble has made ruble securities more attractive to investors. Quotes on the GKO-OFZ market increased slightly last week, though investors are far from pleased with the market’s low yields. The increased demand was satisfied in the first half of the week by the primary market. In the second half of the week, investor activity sank to zero and the Ministry of Finance’s new placements were not very popular. “The government is not offering any premiums on yields, which indicates that it does not want to sell the largest amount of bonds possible. Before the year’s end the minor increase in prices on the state bond market will likely continue, but it will most likely not lead to a substantial shift in yield curves,” argues Dmitri Dudkin, a debt analyst at NIKoil Financial Corporation.

Corporate bonds fared far better, and the rally that began two weeks ago kept going thanks to Western investors. The majority of activity focused on the blue chips. Apparently, investors preferred to sit out the holiday with more or less liquid securities.

After a notable increase in the price of state Eurobonds (in anticipation of a centrist victory in the parliamentary elections and S&P’s upgrade of Russia’s credit rating), demand for the bonds stagnated and prices declined gradually. This came about when the yield on US Treasuries grew after a meeting of the Federal Open Market Committee, at which positive trends for the US economy were announced. “In addition, lower prices were the result of a negative informational atmosphere that kept market participants in a state of constant anxiety. The news of terrorist strikes in Moscow and the final suspension of the YUKOS-Sibneft merger led to a wave of sales,” explained Dudkin.

Falling prices prevailed on the stock market and the RTS Index lost 2% for the week. Investors could not complain of a lack of information: the results of parliamentary elections were greeted enthusiastically by the market. Only RAO EES shares fell slightly, losing a total of 4%. However, the wave of bad news regarding YUKOS once again dragged the market down. YUKOS stock lost 10%. In an atmosphere of price declines, only Surgutneftegaz and Norilsk Nickel managed to hold their own. The active demand for the metal company’s stock was the result of a strong world market for non-ferrous metals.

The Financier’s Date Book

December 17 Tver Province places 1 billion rubles in bonds

December 18 NIKOSKHIM places 0.75 billion rubles in bonds

December 22 Novosibirsk places 1.5 billion rubles in bonds

December 25 Gazprom Board of Directors meets