Russia rebuffs Soros on call for devaluation

MARKETS FELL across the world yesterday after George Soros, the billionaire financier, argued that the Russian rouble ought to be devalued.

Dealers said Mr Soros's comments - made in a letter to the Financial Times - severely damaged market sentiment, already hit earlier by the renewed crisis in the Far East.

The Russian markets plunged by more than 10 per cent - forcing the authorities to suspend trading for 35 minutes - as news of Mr Soros's letter spread. By the end of the day, the market had clawed back some of its losses, closing 101.17 points, down 6.5 per cent.

In his letter to the Financial Times, Mr Soros warned: "The meltdown in Russian financial markets has reached the terminal phase. ... The best solution would be to introduce a currency board [that is, pegging the currency to the dollar or the euro] after a modest devaluation of 15 to 25 per cent."

The Russian authorities refuted all suggestions of a devaluation. Mikhail Zadornov, the Russian finance minister, said: "If we thought that a devaluation was inevitable, we would not be following our current policy. But it is avoidable."

Traders were today expecting another difficult day in Russia after a series of warnings about the country's creditworthiness from leading credit rating agencies. Moody's downgraded its evaluation of the country's debt- paying ability, while Standard & Poor's lowered its long-term counterparty credit ratings on six Russian banks.

The jitters hit almost all the world's stock markets. In the UK, the FTSE 100 closed down 1.1 per cent at 5,399.5, having hit a low of 5,350.3 in early morning trade. In the US the Dow Jones closed down 93.46 points at 8,459.50, erasing an early gain of more than 50 points.

Germany was one of the worst-hit European bourses, with worries about the exposure of German banks to Russia. The electronic Xetra DAX ended 0.59 per cent down at 5,355.03 points, off earlier lows.

Sentiment was hit particularly hard in the emerging markets, where there were rumours of across the board stock selling by US institutions.

The dollar and sterling gained during the day as investors sought "safe haven" currencies. At one point the pound gained more than two pfennigs against the mark, while overnight, the dollar spiked above DM1.80 for the first time in a month.

Mr Soros's assessment of the Russian economic position came against a backdrop of renewed worries in Asia. In Hong Kong, HSBC Holdings, the parent company of the Midland and Hongkong banks, yesterday led the market to its lowest level since April 1993. The blue-chip Hang Seng index tumbled 199 points, a loss of almost 3 per cent, and HSBC alone was responsible for 78 points of the fall after a negative broker's report.

In China, official figures were released estimating that the flooding of the Yangtse River could cost China's economy about $24bn and threaten the country's 8 per cent economic growth target.

Outlook, page 17

PROMOTED VIDEO
Arts and Entertainment
From Mean Girls to Mamet: Lindsay Lohan
theatre
Sport
Nathaniel Clyne (No 2) drives home his side's second goal past Arsenal’s David Ospina at the Emirates
footballArsenal 1 Southampton 2: Arsène Wenger pays the price for picking reserve side in Capital One Cup
News
Mike Tyson has led an appalling and sad life, but are we not a country that gives second chances?
peopleFormer boxer 'watched over' crash victim until ambulance arrived
Arts and Entertainment
Geena Davis, founder and chair of the Geena Davis Institute on Gender in Media
tv
News
i100
Travel
travelGallery And yes, it is indoors
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech
Arts and Entertainment
The Tiger Who Came To Tea
booksJudith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed'
News
i100
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
News
Alan Bennett criticised the lack of fairness in British society encapsulated by the private school system
peopleBut he does like Stewart Lee
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Project manager - Web E-commerce

£65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

Trainee / Experienced Recruitment Consultants

£20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

Trainee Recruitment Consultant - Soho

£20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

Trainee Recruitment Consultants - Banking & Finance

£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

Day In a Page

Syria air strikes: ‘Peace President’ Obama had to take stronger action against Isis after beheadings

Robert Fisk on Syria air strikes

‘Peace President’ Obama had to take stronger action against Isis after beheadings
Will Lindsay Lohan's West End debut be a turnaround moment for her career?

Lindsay Lohan's West End debut

Will this be a turnaround moment for her career?
'The Crocodile Under the Bed': Judith Kerr's follow-up to 'The Tiger Who Came to Tea'

The follow-up to 'The Tiger Who Came to Tea'

Judith Kerr on what inspired her latest animal intruder - 'The Crocodile Under the Bed' - which has taken 46 years to get into print
BBC Television Centre: A nostalgic wander through the sets, studios and ghosts of programmes past

BBC Television Centre

A nostalgic wander through the sets, studios and ghosts of programmes past
Lonesome George: Custody battle in Galapagos over tortoise remains

My George!

Custody battle in Galapagos over tortoise remains
10 best rucksacks for backpackers

Pack up your troubles: 10 best rucksacks for backpackers

Off on an intrepid trip? Experts from student trip specialists Real Gap and Quest Overseas recommend luggage for travellers on the move
Secret politics of the weekly shop

The politics of the weekly shop

New app reveals political leanings of food companies
Beam me up, Scottie!

Beam me up, Scottie!

Celebrity Trekkies from Alex Salmond to Barack Obama
Beware Wet Paint: The ICA's latest ambitious exhibition

Beware Wet Paint

The ICA's latest ambitious exhibition
Pink Floyd have produced some of rock's greatest ever album covers

Pink Floyd have produced some of rock's greatest ever album covers

Can 'The Endless River' carry on the tradition?
Sanctuary for the suicidal

Sanctuary for the suicidal

One mother's story of how London charity Maytree helped her son with his depression
A roller-coaster tale from the 'voice of a generation'

Not That Kind of Girl:

A roller-coaster tale from 'voice of a generation' Lena Dunham
London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

London is not bedlam or a cradle of vice

In fact it, as much as anywhere, deserves independence
Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

Vivienne Westwood 'didn’t want' relationship with McLaren

Designer 'felt pressured' into going out with Sex Pistols manager
Jourdan Dunn: Model mother

Model mother

Jordan Dunn became one of the best-paid models in the world