about icon-addNote android4 Answer apple4 icon-appStoreEN icon-appStoreES icon-appStorePT icon-appStoreRU Imported Layers Copy 7 icon-arrow-spined icon-ask icon-attention icon-bubble-blue icon-bubble-red ButtonError ButtonLoader ButtonOk icon-cake icon-camera icon-card-add icon-card-calendar icon-card-remove icon-card-sort chrome-extension-ru chrome-extension-es-mx chrome-extension-pt-br chrome-extension-ru comment comment icon-cop-cut icon-cop-star Cross Dislike icon-editPen icon-entrance icon-errorBig facebook flag flag_vector icon-globe icon-googlePlayEN icon-googlePlayRU icon-greyLoader icon-cake Heart 4EB021E9-B441-4209-A542-9E882D3252DE Created with sketchtool. Info Kebab icon-lamp icon-lampBig icon-learnHat icon-learning-hat Dislike Loup Loup icon-more icon-note icon-notifications icon-pen Pencil icon-play icon-plus-light icon-plus icon-rosie-cut Rune scrollUp Share-icon Shevron-Down Shevron Left Shevron Right sound sound1 sound2 sound3 sound4 sound2 icon-star Swap icon-translate Trash icon-tutor-ellipsis icon-tutor-flip Tutor folder icon icon-tutor-learned icon-twoWayArrow Mezhdunarodny_logotip_VK vk icon-word pen_icon Logo Logo Logo
Go to Questions & Answers

Ayas Arslanovichadded a note 8 years ago

note (en-ru)

Why the Russian Ruble Is One of the Best Performing Currencies of 2016

By World First | October 3, 2016 10:39 AM EDT

The end of 2014 saw a global supply glut that sent the price of oil into a freefall that continued through much of 2015, dragging many oil-producing/commodity-driven economies with it. As one of the world’s largest crude oil producers, Russia was particularly sensitive to the drop. Oil revenue accounts for around 40% of total revenue, so as oil became cheaper, revenue dried up, plunging the economy into recession. The Russian ruble collapsed.

Desperate to slow the downturn, the Central Bank of Russia moved interest rates from 10.5 to 17%, but the ruble only declined further. Over the course of 2015, the ruble lost over 40% in the currency markets and gave up 17% against the U.S. dollar, making it one of 2015’s worst performing currencies.

Then came Ukraine. Russia’s annexation of the Crimea region and the ensuing conflict with Ukraine sent geopolitical risks soaring and sent the Russian economy further into recession. The losses were widespread; GDP, industrial production, and retail sales all took massive hits. As Moscow persisted, the situation escalated and the west levied sanctions, further depressing the beleaguered economy and its currency.

When a tentative peace was reached in September last year, the conflict scaled back alongside the economic outlook and bets against the ruble. A snap-back was natural when oil prices stabilized and geopolitical risk flattened because the news cycle moved its lenses elsewhere. But does that explain how one of 2015’s worst performers is now its best? Partly. As risks cooled, investors quickly re-priced the value of the ruble, buoying the currency. Alongside this, the dollar slowed its freight-train appreciation which provided some breathing room.

The economic indicators point to an improving, albeit shaky, picture. Although GDP growth and retail sales remain in negative territory, they are on an upward trend following the hard hits of 2015 and industrial and manufacturing production have turned from negative to a tepid positive. The ruble should continue to see support under current conditions, and could easily close the year off with a gold medal for performance against the U.S. dollar.

Natalie Ciavarella is a corporate dealer at World First USA, Inc.

Read more: Why the Russian Ruble Is One of the Best Performing Currencies of 2016 | Investopedia http://www.investopedia.com/stock-analysis/100316/why-russian-ruble-one-best-performing-currencies-2016.aspx#ixzz4TQhRZu5b

Follow us: Investopedia on Facebook

3

Discussion

Share with friends