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Strategies & Market Trends : Investment in Russia and Eastern Europe -- Ignore unavailable to you. Want to Upgrade?

To: baystock who wrote (460)	8/18/1998 10:45:00 PM
From: Rob Shilling	Read Replies (1) \| Respond to of 1301

I would wait a week and let things settle down before thinking the ruble will be devalued 50%. The market will determine the price. The dealers on the streets are taking advantage of the situation. If you buy rubles at 9.5 to the dollar you could make a nice profit if the ruble settles in between the bands. The official rate today was 6.8. If Soros thought 15-20% was good enough, the ruble might find resistence if it goes much much higher than 7. I guess I don't understand currencies too well, but that is my take on the situation. Look at Japan with a floating currency. They have "devalued" or depreciated 40% this year, but they are not being declared bankrupt over the outcome. The IMF doesn't seem to have much of a successful track record, so Russia may have actually made a good decision. They decided to put money in peoples pockets and forget about throwing billions of dollars at the ruble to fight the speculators.

To: baystock who wrote (460)	8/19/1998 3:12:00 AM
From: Real Man	Respond to of 1301

Here is what happened - the government and central bank statement (note: both Kiriyenko and Dubinin offered Yeltsin their resignation that was declined) STATEMENT of the Government of the Russian Federation and the Central Bank of the Russian Federation August 17,1998 The financial markets crisis hit the Russian economy at the beginning of its recovery. Since October 1997, the Government and the CBR have been defending the major achievements in economic policies of the recent years, i.e., stable prices and a strong ruble, and, consequently, the nation's living standards. As a result of deterioration of the foreign economic situation and an unsatisfactory budget revenue situation, the problem of the state debt management has worsened. Expenditures on redeeming the previously issued government securities and interest payments at the time of the low level of tax collections have become an excessive burden on the state budget. The Government of the Russian Federation is forced to reduce domestic debt by cutting federal expenditures and by borrowing abroad. In July, the Government's economic program was supported by international financial organizations and by the leading countries of the world. However, the deepening crisis in Asia and a new decline in the world oil prices have not made it possible to restore confidence in the Russian securities, and consequently to make the budget situation easier Reduction of the country's foreign exchange reserves continues, and the banking system has started experiencing certain difficulties. In this situation, the Government and the CBR deem it necessary to undertake a complex of measures aimed at normalizing the financial and fiscal policies. 1. Starting from August 17, 1998, the CBR switches to implementation of the floating exchange rate policies within the new boundaries of the "exchange band" set at the level of 6 to 9.5 rubles per US dollar. CBR interventions will be used to smooth out sharp fluctuations of the ruble exchange rate. The CBR will use interest rate policies to pursue the same goal. 2. Government securities (GKOs and OFZs) with due dates through December 31, 1999, will be rescheduled into new securities. Technical parameters for the conversion will be announced on Wednesday, August 19, 1998. Trading sessions in the GKO-OFZ market will be suspended until the rescheduling of government securities is completed. 3. In accordance with the provisions of the IMF Articles of Agreement, the Government and the CBR introduce temporary restrictions on capital account foreign exchange operations by the residents of the Russian Federation. Starting from August 17, 1998, there will be a 90-day moratorium on repayment of financial credits extended by the nonresidents of the Russian Federation, on insurance payments on credits backed up with the pledged securities, and on forward foreign exchange contracts. At the same time, a prohibition is introduced for nonresidents of the Russian Federation to invest in ruble assets with maturities of I year or less. 4. The Government and the CBR view a stable operation of the banking system and the system of payments and settlements in the Russian Federation as one of the top priorities. In this context, the Government and the CBR support a payments pool to be set up by the largest Russian banks, aimed at maintaining the stability of interbank settlements. At the same time, the CBR intends to make an additional effort to strengthen the Russian banking system, and involve both stable Russian banks and leading foreign banks in the solution of this task. 5. To restore the financial market, the Government of the Russian Federation will in the nearest future begin the placement of short-term (one or two week) government securities. The range of securities issued for population will be extended. 6. The Government and the CBR are submitting legislative initiative to the Federal Assembly to tighten control over the outflow of foreign exchange resources abroad. At the same time, the Government and the CBR intend to take urgent actions in this area within their current authority. 7. The Government of the Russian Federation once again call on the State Duma with a proposal to hold an emergency session before the end of August, and to adopt the key draft laws which will ensure the timely payment of pensions and wages to the budgetary employees, develop legislative procedures for rehabilitation of banks, and strengthen the system of foreign exchange regulations and foreign exchange control. Chairman of the Government of the Russian Federation S.V Kiriyenko Chairman of the CBR S.K. Dubinin