Forex Blog: Currency Trading News & Analysis.

December 26th 2008

Ruble to Depreciate Gradually

The perfect economic storm continues to brew in Russia; the financial crisis is sapping demand for Russian securities, and a decline in the price of oil (as well as other commodities) has turned the balance of trade from surplus to deficit. As a result, Russian banking officials seem resigned to a depreciation in the Ruble, but are understandably averse to a sudden devaluation, which could shock the economy into complete collapse. Nonetheless, in the last week, the currency recorded record drops as the Central Bank took advantage of Dollar weakness to adjust the band in which the Ruble is permitted to fluctuate (read: decline). Given continued weakness in the price of oil, combined with a faltering economy and surging domestic unemployment, investors should continue to expect precipitous drops in the Ruble, as it sinks to a sustainable level. Bloomberg News reports:

Troika Dialog, the nation’s oldest investment bank, and Goldman Sachs Group Inc. predict the ruble will have to weaken by at least 20 percent against the basket to reignite an economy stymied by a 62 percent drop in oil prices since July.

Read More: Ruble Falls Most Against Euro Since 1999 on Double Devaluation

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Posted by Adam Kritzer | in Central Banks, Emerging Currencies | No Comments »

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