Should you sell the Russian ruble now?

Posted Feb 13th 2009 11:20AM by Connie Madon
Filed under: International Markets, Forecasts, Russia, Oil

While in the United States our presses are running full throttle printing money, in Russia just the opposite is happening. In a herculean effort to defend the ruble, which has fallen 35% since autumn, Russia raised its one-day repurchase rate to 10% from 9%. The central bank has already engineered six such increases last year.

Russia has spent over $200 billion in recent months supporting its currency at a level of 41 rubles against a basket of 55% dollars and 45% euros. So far this week, the ruble has held steady at these levels. In addition, the central bank has lent rubles short-term for the equivalent sum of $13 billion, thus sharply reducing the supply of rubles.

The central bank has significant control over money supply and exchange rates and has the ability to keep the exchange rate under control.

However, even with all of these measures, the ruble is dependent upon the price of oil, which is a large export commodity for Russia. If the price of oil were to fall to $30 per barrel, the value of the ruble could fall another 15%.

Will the ruble hold its value?

Tags: interest rate hike, InterestRateHike, oil, ruble pricing, RublePricing, Russia

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Reader Comments (Page 1 of 1)

2-13-2009 @ 12:42PM

John said...

I WANT VODKA!!!

2-13-2009 @ 1:41PM

Mitch Tuchman said...

If you are a contrarian (as I am), you'd buy RSX which is an ETF on the Russian economy which sells today for around $13, down from a 52 week high of about $60. Owning Russia is essentially another way of owning commodity producers.

This ETF has holdings (based in rubles) such as: Gazprom, Lukoil Company, MMC Norilsk Nickel, Mobile Telsys, NK Rosneft, Sberbank Rossii, Surgutneftegas, , and Vimpel Communications.