In Russia, Bailed-Out Banks Are Shorting Roubles


American banks take a lot of heat for not lending TARP money out, but it could be worse. Take Russia where banks have been actively betting against the economy:

FT: On Friday the central bank raised its refinancing rate by 100 basis points, to 13 per cent. Since last August Russia’s central bank has spent over $200bn (€155bn, £140bn) defending the rouble at a gradually depreciating rate.

Mr Moisseev and other traders are cautiously optimistic that this strategy of tightening liquidity can keep the rate stable, largely because, until now “the majority of the speculation against the rouble has been financed by the central bank’s own liquidity”, he said. In other words, the central bank has been providing cheap rouble loans for banks, to boost liquidity in the banking sector, but rather than lending these roubles into the economy, the borrowers would turn round and buy dollars.

Again, at least American banks aren’t using TARP money to, say, buy euro debt in large amounts (as far as we know). And we can think Russia for the insatiable demand for Dollar assets in this time of crisis.

(via Alex Kirtland)