By Asher Levine and Sujata Rao
SAO PAULO/LONDON Feb 26 Ukraine's hryvnia
currency tumbled on Wednesday to a record low, as investors were
unsettled by the country's murky political and economic
outlook, while Brazil's real retreated after a five-day rally.
Ukraine remains without a settled government several days
after President Viktor Yanukovich was overthrown, raising fears
the country will fail to secure outside financial support in
time to repay debts as its own hard currency reserves dwindle.
"The whole political picture in Ukraine has become even more
blurred than before," said Simon Quijano-Evans, head of emerging
markets research at Commerzbank in London.
"As long as there is no clear resolution on who is in charge
and as long as there is no unity among global policymakers on
resolving the issues, it is impossible to say what happens to
Ukraine's foreign currency reserves have dropped to $15
billion from $17.8 billion on Feb. 1, central bank chief Stepan
Kubiv said on Wednesday.
The country has asked the International Monetary Fund to
help prepare a new financial aid program, Kubiv said, adding
that the new government would soon have its own anti-crisis
Investors remained shaken, driving the hryvnia down
around 4 percent to 10 per dollar, while five-year credit
default swaps jumped 76 basis points, Markit data showed.
Meanwhile, Russian president Vladimir Putin, a key
Yanukovich ally, put combat troops on high alert for war games
near Ukraine on Wednesday, adding to tensions over escalating
conflict in the region.
Concern spread to Russian assets where the rouble
fell to five-year lows against the euro and bank shares fell.
Russia holds $3 billion worth of Ukrainian debt issued last
December which could end up in default if certain bond covenants
are breached. [ID: nIFRh2jP1]
"These Ukraine concerns (are weighing) on the rouble," said
Maxim Korovin, fixed income analyst at VTB Capital in Moscow,
adding that investors may be betting against the rouble as a way
to reduce exposure to the region and so indirectly hedge their
"If you short the rouble and the rouble is weakening that
will offset your loss," he said.
REAL WEAKENS, PETROBRAS DOWN
Brazil's real ended a five-day gaining streak against
the dollar, weakening 0.2 percent. Local traders said the move
reflected a normal readjustment following the rally, which was
sparked by optimism over the government's new, more realistic,
primary fiscal surplus target.
Yields on interest rate futures were mostly stable
with Brazil's central bank seen set to likely hike its benchmark
interest rate by 25 basis points later on Wednesday, according
to a Reuters poll.
Brazilian stocks' benchmark Bovespa index rose 0.4
percent, erasing some of its 1.4 percent loss in the previous
Better-than-expected earnings from planemaker Embraer SA
and telecommunications firm Telefonica Brasil SA
supported gains in the morning, but shares of
state-run oil producer Petroleo Brasileiro SA
weighed. The company known as Petrobras posted a 19 percent drop
in quarterly profit and cut its near-term investment outlook
"We believe it has excellent assets in its portfolio and
impressive growth potential, but government intervention with a
negative effect could make the 'stairway to heaven' a rocky and
long road that some investors might want to avoid," wrote HSBC
Securities analyst Luiz Carvalho on Wednesday.
Elsewhere in Latin America, Chile's peso fell to its
weakest level in three weeks, driven mostly by higher demand for
dollars due to expiring forward contracts, a trader said.