BUSINESS

Russia’s hopes of turning the rouble into an internationally-traded commodities currency rely on curbing inflation and increasing the range of rouble-denominated instruments.

Traders say the rouble is highly undervalued, making it a good match for the carry trade, when investors borrow in low-yielding currencies to lend or invest in currencies with big returns.

“The rouble is a very interesting commodity-carry trade currency that has not yet been discovered,” said Kingsmill Bond, chief strategist at Troika Dialog. “Now the rouble is the cheapest currency of the commodities countries, and people are looking for less obvious stories next year and are likely to shift towards the rouble.”

Yegor Usin, senior analyst at Alpari, said that the rouble’s “trend is positive”, having grown from 0.7 per cent of world currencies turnover in 2007 to 0.9 per cent this year.

Foreign-based investors have increased rouble trading since the crisis hit, and trade between the dollar and rouble has risen to an average daily turnover of $2.6 billion in Britain.

MICEX president Ruben Aganbegyan confirmed that the rouble-denominated exchange will start trading the rouble and yuan from mid-December, while Chinese officials said on Monday that the rouble would be tradable in Beijing.

Yaroslav Lissovolik, chief economist at Deutsche Bank in Moscow, said trading the rouble on foreign exchange markets would be supported by the planned rouble-denominated eurobond and an agreement with China to use it and the yuan for settlements.

Darryl Hooker, a London-based trader for Icap, says that the Russian Central Bank’s development of  the Banking Electronic Speedy Payments real-time settlement system, which allows investors to trade instantly, is another step forward.

“The Central Bank should force all correspondent banks to use the BESP real-time settlement system,” said Hooker.

But BESP, which was launched in 2007, faces problems because it exists in parallel with the “Bank of Russia Payment System”, which still dominates due to political reasons, he added.

A survey by Icap said 80 per cent of foreign exchange professionals believed the BESP system would become the main settlement instrument for the rouble, while only 43 per cent of them believed that Russian commercial banks would offer prime brokering services for roubles.

He added that those not prepared for new technology and new platforms would fall behind other traders.

But some analysts say inflation and a shortage of rouble-denominated instruments will prevent international trade of the rouble taking off.

“The main impediment for foreign investors is the lack of instruments, so they want to do it to get exposure,” said Bond, of Troika Dialog.

Investors working with the rouble are understood to have mixed feelings about the Finance Ministry’s readiness to launch rouble-denominated eurobonds, which were meant to be prepared by mid-November.

“High inflation in line with a typical lack of knowledge on what is happening in Russia is among other negative factors,” said Bond.

Only 22 per cent of those surveyed by Icap said the rouble would become a recognised trading currency among the Group of Eight major economies.