| LONDON, March 17
LONDON, March 17 The rouble touched new lows on
Monday on fears of economic fallout from Russia's standoff with
the West over Ukraine, while the yuan took its biggest daily
fall in three years after China widened its trading band.
Some Asian currencies hit multi-month highs to the dollar,
bucking the weaker yuan which fell half a percent in spot
exchange rate markets after the central bank widened its
trading band to 2 percent, signalling authorities may tolerate
more currency weakness.
It weakened less on the central bank's daily fix.
Equities were generally higher however, with MSCI's
benchmark index up 0.2 percent, rebounding off
five-week lows after Chinese shares gained 0.4 percent.
EU ministers are expected to agree sanctions including
travel bans and asset freezes against Russian and Crimean
individuals following Sunday's referendum in Crimea which voted
overwhelmingly to become part of Russia.
Russian stocks, which fell 7 percent last week to 4-1/2-year
lows in anticipation of the sanctions, rose 1.8 percent
on relief that the Crimean vote had passed without fresh
violence and that sanctions were yet to materialise.
Sanctions could devastate Russia's already flagging economy,
and the rouble eased 0.3 percent to the dollar to a new record
low of 36.7. Non-deliverable forwards priced the rouble
at 36.96 in a month's time and at 38.4 in six months.
"We are in wait-and-see mode to see what sanctions there
could be, if the sanctions are stringent on banks, then capital
outflows could accelerate," said Manik Narain, emerging markets
strategist at UBS. "But Russian markets seem to be taking the
view sanctions won't be as punitive as originally feared."
He noted however that implied 12-month yields on the rouble
- the difference between the spot rate and the forward/futures
rate - had risen sharply to almost 10 percent after the central
bank raised rates and bearish bets on the currency grew. The
yield was just above 6 percent in mid-January, he said.
"For the rouble weakness to fade, you will need to see that
the sanctions are really toothless," he added.
Neighbouring equity markets, from Poland to Turkey, rose
0.5-1.0 percent, tracking Western European markets
The Turkish lira eased 0.6 percent versus the dollar
ahead of a central bank meeting on Tuesday that is expected to
leave interest rates unchanged.
But in Serbia, investors were encouraged by a much stronger
than expected win in a weekend election for the SNS party, which
has promised a drastic economic overhaul and to secure a
precautionary loan from the Internatiional Monetary Fund
The Serbian dinar rose slightly to one-month highs to the
"The news should above all embed confidence of foreign
direct investors and highlight a pocket of relative stability in
the region that will be conducive to solid performance of Serb
assets," Commerzbank analysts said in a note.
For CENTRAL EUROPE market report, see
For TURKISH market report, see
For RUSSIAN market report, see )