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Ruble trading halted
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August 26, 1998: 7:52 a.m. ET
Russian currency suspended against the dollar after falling 5 percent
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NEW YORK (CNNfn) - Trading of the Russian ruble was halted Wednesday against the U.S. dollar as investor fears about the country's ailing economy turned from bad to worse.
The Moscow Interbank Currency Exchange (MICEX) suspended ruble-dollar trade after the ruble fell 5 percent against its previous dollar price fix, triggering automatic circuit breakers.
The ruble also slid 40.8 percent against the mark in thin trade on Wednesday, fixing at 7.6000 rubles per mark versus 4.4995 rubles to the mark on Tuesday. Trading of the ruble/mark was suspended for 20 minutes during the day.
"There will be no trading (for the rest of the day) to set the fixed rate, but trading through our electronic system is continuing," a MICEX official said.
News of President Boris Yeltsin's new debt repayment plan Tuesday sent the ruble tumbling to its lowest point since October 1994, the day that became known as Black Tuesday.
The ruble fell 10 percent Tuesday to 7.88 from 7.14 to the dollar after trading was twice suspended. The currency stood at about 6.2 to the dollar just 10 days ago.
Trading was again halted Wednesday after the ruble fell to 8.26 to the U.S. dollar.
The RTS index of leading shares closed down 13.83 percent to 76.26 on reported turnover of $5.33 million, bringing it within striking distance of its all-time low of 66.69, reached on March 18, 1996.
Panic raged among Russian citizens, who rushed to banks to withdraw their savings, while some stores closed down to mark up prices.
"People are also withdrawing en masse their ruble and dollar savings from banks," said a cashier in the Omskpromstroibank in the Siberian city of Omsk.
Overseas investors, disappointed by Yeltsin's debt repayment plan, were largely responsible for stock sell-off.
Yeltsin, who had frozen debt repayment, said he would pay back some $40 billion in bonds but overseas investors won't get as much as they had hoped and they may have to wait up to five years.
Under Yeltsin's plan to replace government ruble debt with new bonds, investors will get more than 30 cents on the dollar - possibly less.
Russia said Wednesday it will distribute a term sheet outlining full details of the planned ruble debt restructuring on Thursday.
Trading at MICEX is split into two sectors - exchange trade that fixes the daily rate and electronic trade. The fixed rate is used by the central bank for setting its official rate, as well as in financial operations between companies and banks.
The electronic sector of MICEX is effectively interbank trade, which sets no fixed rate. The electronic system belongs to MICEX.
The ruble has come under increasing pressure after former prime minister Sergei Kiriyenko, dismissed on Sunday, gave up the fight to hold it within an earlier target trading band which had a stronger ruble-dollar rate.
The outgoing government also declared a 90-day moratorium on some foreign debt and suspended trade in domestic government debt pending the restructuring of short term treasury bills (GKOs) and government bonds (OFZ).
Yeltsin is now scrambling to replace the ousted government.
The deepening crisis in Russia led to declines in European shares. Frankfurt was hardest hit among major European bourses, with the Xetra-DAX declining 2.9 percent in a reflection of German banks' large exposure to Russian debt.
Deutsche Bank AG shares dropped more than six percent to almost a six-month low.
In Moscow, the new government of acting prime minister Viktor Chernomyrdin wrestled with a financial crisis expanding in all directions by the hour.
"Financial and economic policy is a question to which I am giving my attention minute-by-minute," Itar-Tass quoted Chernomyrdin as saying.
"I declare that I am extremely dissatisfied with the work of the central bank over the last two days."
The report said he would talk to the bank's chief, Sergei Dubinin, later on Wednesday.
Western analysts said Tuesday's debt reform plan was an effective default, with many crucial questions unanswered. They say it will hit investor confidence in Russia for years to come. 
--from staff and wire reports
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