Rouble collapse? Foreign "speculators" say it wasn't us

Wed Dec 17, 2014 1:46pm EST
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By Karin Strohecker and Jemima Kelly

LONDON Dec 17 (Reuters) - A 20 percent currency drop in two days sounds like the opportunity of a lifetime for a savvy hedge fund superstar to earn a fortune. But foreign fund managers say they have mainly stayed away from bets against the rouble, because the Russian market is just too unpredictable and costly.

Dragged down by falling oil and Western sanctions over Moscow's involvement in the Ukraine crisis, the rouble has declined steadily against the dollar since June, culminating in a freefall this week.

Moscow has railed against foreign "speculators". But many of the people who might be proud to accept such a title say this time, they weren't to blame.

"It has just become too disorderly," said Paul Lambert, head of currency at Insight Investment who runs a $300 million currency fund and exited his rouble positions about a month ago.

"You need to feel like you can get in and out, you need to feel like there is some kind of predictability. When something is in freefall, like oil prices are or the rouble is, it is very difficult to say: 'Today is the day, that enough is enough'."

Fund managers such as Lambert say it was local demand for dollars in Russia itself that broke the rouble, with Russian firms scrambling to buy hard currency to pay off loans, and ordinary Russians queuing up to buy dollars and consumer goods.

Russian companies needed to repay $45 billion in the last three months of the year. See graphic:

Last week, state-run oil company Rosneft issued 625 billion roubles worth of bonds. It said the cash, then worth $11 billion, was for domestic projects and would not be sold to buy dollars, but many in the markets took it as a signal to sell.   Continued...