The ruble continued its slide on Wednesday against the world's major currencies amid foreign investors' increased fears of political instability in the country after Sunday's parliamentary election while Russian stocks showed mixed dynamics following Tuesday's slump.
Russian stock indexes plummeted by more than 4 percent on Tuesday, sinking deeper into the red than any other world stock indices while the ruble plunged by over 30 kopecks against the U.S. dollar past the psychologically important level of 31 rubles to the dollar as investors, unnerved by S&P's decision to put six leading eurozone economies on the list for possible downgrade, found a new reason to dump their Russian assets.
The investors' aversion to ruble-denominated assets appeared to be the result of increased political instability in the country after Sunday's parliamentary elections, in which the pro-Kremlin United Russia party suffered its worst ever nationwide result and the country was hit by street protests over alleged mass electoral fraud in favor of Prime Minister Vladimir Putin's ruling party.
The Russian stock market witnessed a massive selloff of equities during the late afternoon on Tuesday, plunging to a five-week low as the RTS index fell 4.7 percent to 1,485.67 points and the MICEX declined 3.95 percent to 1,457.9 points.
Analysts said, however, that the effect of street protests in Russia against the alleged electoral fraud was short-lived while S&P's decision to put six leading eurozone economies with the highest AAA rating, including Germany and France, on the list for possible downgrade could be overweighed by a positive outcome of the EU summit.
"Now, a lot of things are dependant on the market situation. The various rallies and protests of those who are dissatisfied with the organization and results of the elections caused a serious plunge in stock prices. In these conditions, a quite reasonable decision is to wait turbulence is over and the situation on the financial markets stabilizes," Investcafe analyst Nikita Ignatenko said.
As of 11:51 a.m. Moscow time (08:51 GMT) on Wednesday, the ruble fell by just one kopeck against the U.S. dollar to 31.1390 and by 23 kopecks against the single European currency to 41.8790. The value of the bi-currency basket comprising $0.55 and 0.45 euros increased by 1 kopeck to 35.9478.
The ruble-denominated MICEX index fell 0.40 percent to 1,452.06 while the dollar-denominated RTS was up 0.20 percent to 1,488.68.
Russian business daily Kommersant on Wednesday quoted Alfa-Bank analyst Angelika Genkel as saying that massive selloffs on the Russian markets would stop as soon as investors' fears were allayed.
"And if the EU summit and the European Central Bank influence the world stock markets positively, Russia will again become the same recipient of liquidity received by financial markets from the global central banks like other countries," she said.
