LONDON: The rouble slipped on Wednesday after ratings agency Standard & Poor's warned it could downgrade Russia in the new year, while robust U.S. growth data boosted bets on the Federal Reserve raising rates soon, subduing broader emerging markets.
The rouble dropped 0.2 percent against the dollar in the wake of S&P warning that Russia's sovereign rating could move into junk territory as soon as mid-January.
"The question is whether they (Russia) are going to default, and we think no ... but I still don't think it is time to go back into that market," said Ramin Nakisa, a global markets strategist at UBS in London.
However, Russian stocks were stronger, with the dollar-denominated RTS index up 1.4 percent after the central bank said it would lend hard currency to major firms to help them refinance foreign debts, accepting foreign borrowings as collateral.
State-owned and private companies have accumulated a total of $600 billion in foreign debts, of which around $100 billion are due next year. Their ability to repay the debts or roll them over has been severely reduced by Western sanctions, imposed over the Ukraine crisis.
Meanwhile, revised data showing the U.S. economy grew at 5.0 percent in the third quarter, the quickest pace in 11 years, prompted speculation that the Federal Reserve would end its ultra-low interest rate policy sooner than previously thought.
Many emerging markets, dependent on foreign investment capital, are seen as vulnerable to a strengthening U.S. dollar, which lures money away with the prospect of better returns for less risk.
"The dollar is going to strengthen, so emerging market currencies are going to weaken, so I see that being a bit problematic for emerging markets," Nakisa said.
Among those seen as most vulnerable, Turkey's main share index shed 0.4 percent while the lira was flat before the central bank's monthly monetary policy meeting later on Wednesday. Analysts expected no change to interest rates.
The MSCI emerging stocks index was flat on Wednesday, lagging a 0.2 percent gain on the benchmark for Asia excluding Japan.
However, while many of the region's markets were cheered by the U.S. growth numbers, with Taiwan up 1 percent and South Korea rising 0.4 percent, Shanghai shares dropped 1.9 percent, with analysts blaming profit taking.
Saudi stocks rose 1.5 percent ahead of the announcement of the kingdom's 2015 state budget, anticipated for Thursday and widely expected to show the government maintaining spending at high levels despite the plunge in oil prices.
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