The Russian rouble eased on Thursday after the central bank stepped up rhetoric against the currency's 2-1/2 month long rally, forecasting more rate cuts and proposing measures to curb speculative capital inflows.
Russia could consider various soft measures to curb inflows, which could include changes in reserve requirements, caps on banks' open foreign currency positions and also broader regulation on cross-border action such as taxes, central bank's first deputy chairman Alexei Ulyukayev said on Thursday.
But, when asked by reporters whether Russia could follow in the footsteps of Brazil, Ulyukayev replied:
It is just an example... There could be such an option, there could be various other options. But there is no such proposal, no plan. It is a basis for discussion.
There is no deadline, no criteria, no red flags (on the introduction of measures to curb inflows), he added.
Emerging stocks dropped by one percent on Thursday and currencies weakened as investors eyed the spread of capital controls in emerging markets.
Brazil, which last month introduced a tax on foreign investment in its bonds and stocks ,took another step on Wednesday aimed at containing the appreciation of its currency, unveiling a tax on certain trades involving American Depositary Receipts issued by Brazilian companies.
Ulyukayev's boss, Sergei Ignatyev, on Wednesday said any Russian measures would be soft, reiterating his opposition to the re-introduction of capital controls.
All this news flow -- yesterday, today -- is negative for the rouble. And it is possible that with these verbal interventions the central bank is trying to limit the appreciation of the rouble and this can start to affect the market, said Vladimir Osakovsky, analyst at UniCredit Bank.
He added that there was no reason to disbelieve authorities' assertions that there will be no capital controls.
The rouble eased as far as 35.32 versus a euro-dollar basket RUS-MCX, its weakest since Nov. 9, before trimming losses to stand at 35.18 by 1120 GMT.
Dealers said Russian companies needing to pay back foreign debts contributed to the rouble's depreciation.
The central bank -- which has regularly been buying foreign currency to slow down the rouble's rally -- was not seen in the market on Thursday, they added.
The central bank shifts the boundaries of the floating 3-rouble-wide corridor by 5 kopecks for each $700 million in purchases, and Ulyukayev said the corridor is currently located at 35-38 roubles to the basket, confirming dealers' estimates.
In addition to the current floating corridor, the central bank keeps the rouble within a firm band of 26-41 roubles to the basket.
Prospects of further interest rate cuts are another factor that could weigh on the rouble, which looks very attractive to investors seeking high yields thanks to Russia's benchmark rate of 9.50 percent compared with rates of 1 percent or less in the rest in most major developed economies.
Ulyukayev said the next cut could come before the end of the month and the issue will be discussed at the central bank's Nov. 24 board meeting.
UniCredit's Osakovsky said there would be scope for at least 100 basis points of further rate cuts by year-end.