Neil Davies, Head of Trading at PlutusFX, takes a look at the Russian Rouble.
Whatever the views, or arguments over Russian tanks entering Ukraine, their currency certainly has that tag to it. Currently standing at 55 Roubles to the USD, from 32 at the start of the year and 46 a month ago, the Russian currency is falling fast.
Last week Russia’s central bank intervened in an effort to support the market, spending over four and a half billion USD to try and support the currency, bringing the total spend to $70bn this year. It clearly hasn’t had much effect, or alternatively, where might the Rouble be now without it?
Now the central bank has raised its interest rate to 10.5%, just six weeks after raising it to 9.5%, in an effort to constrain inflation that is now running at 9.4%, which has gained momentum due to both the weak currency and the banning of Western food imports.
Clearly the main killer for both the Rouble and the Russian economy is the plummeting oil price. Indeed, it is muted that this is the big weapon brought into play by the Americans with the assistance of their Saudi friends, to bring pressure on the Russians. Both parties have far deeper pockets to cope with the price fall, with many parts of Western economies benefitting from it. It will be interesting to see in the future, as and when the Ukrainian crises hopefully comes to a peaceful end, whether the oil price starts to slowly push forward again.
