Forex Blog: Currency Trading News & Analysis.

January 25th 2009

Ruble to Continue Falling

The Russian Ruble is sliding faster and faster, having most recently reached a pace and level not seen since 1998, when Russia famously defaulted on its debt, and the currency lost more than half of its value in under a week. The Central Bank is keen to avoid a similar catastrophe this time around which is why it has diligently controlled the Ruble's descent, rather than allow the currency to reach an equilibrium in the spot market; such would likely result in a precipitous drop and perhaps a loss of confidence in the nation's banking system. Unfortunately, given the current m.o. of consistent but gradual devaluation, foreign investors are hesitant to own the Ruble, conscious of its inevitable decline. In fact, futures prices indicate that it is due to fall another 11%, with experts suggesting that this could be implemented over a time period as brief as one month, in order to return the economy to "normal" functioning as quickly as possible. Bloomberg News reports:

The falling ruble is causing banks, companies and individuals to hoard foreign currency. "All the attention of the people is focused on the forex market. Companies aren’t buying supplies, they’re investing their rubles in dollars instead because the play is too attractive."

Read More: Ruble Drops to Pre-1998 Crisis Low on 6th Devaluation This Year

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

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