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9 Reasons Why The Russia Ruble Is The Best Performing Currency Year-To-Date
Submitted by Constantin Grudgiev via True Economics blog,
There is an interesting debate starting up around the Ruble: in recent weeks, Ruble appreciation against the USD has pushed it out of its traditional long term alignment with oil prices, as noted in the chart below:
Leaving the Ruble the best performing currency in 2015...
There are several possible factor that can account for this.
- Oil price expectations - if the markets expect oil prices to rise further, Ruble buyers can bid the currency up ahead of the oil price changes. This is unlikely in my view, as we are not seeing oil price firming significantly in both spot and futures markets.
- Oil price revelation - if the markets priced in severe forecasts uncertainty linked to oil price dynamics to the Russian economy back in October-December 2014, then the new information about Russian economy's performance in Q1 2015 should lead to re-pricing of risks. In my opinion, Ruble was heavily oversold in December (not in october-November) and there is some upside potential, given that the Q1 2015 data coming out of the Russian economy is not as apocalyptic as some currency markets analysts expected. Notably, there has been a significant cut in USD long positions vis-a-vis Ruble in recent days, which signals speculative re-alignment toward long-Ruble.
- Demand Factor 1 - March is the end of Q1, so it is the month of rising demand for Ruble to cover corporate tax liabilities (Russian corporates pay taxes in Rubles). VAT receipts are also coming due. And estimated forward taxes and charges. In my opinion, this helps to temporarily boost Ruble valuations.
- Demand Factor 2 - March is the last month before major companies in Russia are due to reverse their forex holdings to October 2014 levels (per December agreement hammered out by President Putin). This means increased supply of USD and other currencies, and increased demand for Rubles. Again, a temporary factor, in my opinion.
- Supply Factor - March and April are also large months for corporates to book in energy-related exports earnings. Note that Russian Central Bank is recording a small rise in reserves in late March, followed by a decline in April.
- Demand Factor 3 - March also was the month of largest (for 2015) external debt redemptions by Russian banks and corporates. Repayment of these debts involves buying dollars and selling Rubles, but timing-wise, companies have been pre-building their forex reserves for some time, so it is most likely that in recent 3 weeks there has been less demand for dollars (and other forex) than in previous 2 months. Note, I covered this here: http://trueeconomics.blogspot.ie/2015/04/8415-rubles-gains-are-convincin...
- Demand factor 4 - since the start of 2014, Russia actively pursued reduction of the degree of dollarisation in its economy. The first stage of this process involved increasing trade settlements in other currencies (most recent one - announced this week - with Indonesia). This, alongside with imports collapse, reduced external trade-linked demand for dollars. The second phase of de-dollarisation started in February, when Russian retail deposits started exiting dollars and shifting back into Ruble on improved confidence in the banks and high deposit rates. Again - a temporary support for the Ruble.
- Demand factor 5 - as Russian CDS show, probability of default declines for Russia sustained in recent weeks implies improved demand for Russian Government (and local) bonds, issued in Ruble markets. The result is improved demand for OFZs and, thus, for Ruble.
- Real vs Nominal exchange Rates - inflation dynamics in Russia are most likely drawing a gap between real and nominal exchange rates, so nominal rate firming up is not imposing equivalent increase in the real rates.
In other words, we have many, many moving parts to one equation. One can't tell the dominant one, or which are likely to last longer, but my sense is that majority of these forces are temporary and the long-run link between Ruble and oil price will be regained.
Now, assuming oil price dynamics remain where they are today (weak upside), Ruble is likely to devalue again, back to USD/RUB 55-57 range. If inflation does not fall toward 10% in Q2 2015 (and I do not think it will), we are likely to see Ruble move into USD/RUB 60-65 range over this quarter. On the other hand, improved outlook for the economy (signalling, say annual contraction closer to 3.5-4 percent) can see Ruble staying within the USD/RUB 50-53 range.
One thing is for sure: so far, the Central Bank of Russia has managed damn well its dance in a very tight monetary policy corner between runaway inflation, prohibitively high interest rates and a massive squeeze on forex valuations.
How long this 'smart game' in multidimensional and highly dynamic chess can go on is everyone's guess.
* * *
We have one awkward question: If, as Janet Yellen explains, the USD is rallying because the US economy is so strong... Why is the Russian Ruble outperforming the USD by so much?
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Russia ain't doing great but they aren't sliding into the ocean either and they might just outlast the EU.....
Their sovereign gold can actually be counted.?!
Not yet, that's their hole card....
9 Reasons?...
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Anyone else think Russia gets stroked just a little to much on alt media? The ruble is outperfoming because they prevented complete currency collapse, barely. Not exactly impressive. It is doing well against the dollar because the dollar had its rally while the ruble was crashing. Don't get me wrong I have no love for the dollar, but the ruble looks good only if you have a very short memory.
http://www.debtcrash.report/entry/us-strength-in-the-upcoming-monetary-shift
Nope. The US Nazi Regime gets stroked way too much in both legacy and alt media. The only people who talk about stroking Russians are shills.
Lol touchy touchy. I certainly am not impressed with the US government and if I knew all of the horrible things they had done I would probably move. That said I certainly don't think the Russians or Chinese are going to be the savior from US tyranny. I think if we want to correct whats wrong with the US we better look to ourselves. Just because the US is a bad guy, and the Russians are the enemy of the US, that doesn't make them the good guys. The same could be said for the Chinese. I think people miss that point way too often. Is my logic off?
your logic is not off, but you underestimate how thrilled some of us are that there is finally someone who is challenging the evil empire of USSA and its global imperialist agenda.
the USSA for decades has been the greatest threat to humainty and world peace, and i for one am glad to see it crumbling.
speaking for myself only, i don't see russia or china as saviors or good guys, because no governments can ever be the good guys, but i am glad for them, and i also believe the USSA facist state propoganda machine which maligns them, and attempts to incite war with russia, is out of control.
It couldn't have anything to do with the giant shit the Ruble took right before it bounced a little.
Your logic is not off.
It's easy to get caught up in loathing the United States when one first becomes aware of just how bad Uncle Sam is, and at this point in my life, I consider myself an enthusiastic hater of this country.
But I'm not so blinded by antipathy that I think the grass is greener on the other side. As far as I can tell, there isn't even any grass left anywhere. It's all just dirt.
Mcmolotov, stacking 12321. I certainly understand both your sentiments and am pretty close to both of you in your thinking. I still love my country; it is my home, though I pretty much hate its government, two very different things. I just get concerned when I start to see people support other governments that are just as bad as or worse than our own. There are far better ways to oppose the tyrannical forces that are so prevalent in our country.
@bwh1214, funny thing is, most of the world thinks like that. No issue, problem or anything at all with US population. Government is a different thing. Traveled a lot and stayed for quite a while in 'nasty' (from a us government viewpoint) countries. Without exception, the message i found was: great country, government sucks (a lot, so much we want to kill them all even if take down some civilians).
You certaintly are 100% right that the fight against tyranny does not start with supporting the 'other guy' but from within.
Reason #10: their chief of their central bank is way smarter than our chief of our central bank (and much better looking...)
Not necessarily smarter but more likely to have his counytry's interests at heart.
They've got Elvira Mistress of the Dark.we've got Kathy Bates in Misery
"I certainly don't think the Russians or Chinese are going to be the savior from US tyranny." ANY time that US intelligence whistleblowers are hiding in Russia, we should probably take a step back and reevaluate all of our formerly stable assumptions.
you suck and so do your other accounts purposed for the same task of russia-bashing while paying lip service to being reasonable in some fashion.
I swear to god, the hacks who write the scripts for you people base their research on AVERAGE intelligence.
You know what happens when its presented to people in the top few %?
Guess.
So let me get this straight, you think I'm reading from some script, hilarious. I am not part of some conspiracy. This is my site and obviously I am very critical of the US government.
http://www.debtcrash.report/
The problem is there may be plenty of conspiracies out there but you are seeing them in to many places. Sorry bud I think you missed my point, but hey if you think Russia is the answer, take a trip over there and tell me all about it.
Hey what your talking about, trolls trying to sway opinion may be out there, but I'm not one of them.
Yup. Without a doubt. Russia isn't a bad bet in the longer term, but right now they aren't exactly an oasis of riskless returns. As for being stroked on the alternative media, well, they seem to be running the majority of the alternative media, or have ties to the nations running it so.. no surprises there.
Funny how media outlets these days are more or less predictable based on the countries they are headquartered in. Free press? What's that about?
to me looks like that CBR move ruble. and it looks lika that they are moving ruble out of circulation. can clearly see in russia money supplay m 0. that was the plan
The problem is that there are countries - Russia, China, Singapore, ... - which are not liberal free-market democracies, but which, all said and done, are doing fine. More often than not they're doing better than Western-style liberal democracies. And that grates.
@anonymice,
basic logic for that is (in my humble opinion) that thse government forms have actually something to loose from f*cking up. In a democracy )what ever that means nowadays) no one is really accountable. As Tuco (from the Good, Bad & Ugly) aptly stated: "one asshole goes in, and another comes out". Kings have their neck to worry about.
Never thought I would say it, but perhaps absolute monarchy is better than the rest (except for anarchy of course).
Not being pedantic, but presumably you mean anarchism, not anarchy?
yeah, because "liberal" democracy is the stupidest system ever (if we only just could throw away the liberal part!) and the Western economies are no longer "free-market". I am afraid Russia now has much more of a "free-market" economy" than the West, simply because the West has NONE whatsoever. Besides, if you go to Russia, you will find out that they are trying hard to develop some kind of a free-market economy, especially at the lowest level - small and medium companies, which I think is a very good policy, it just remain to see, if it catches on. But you see the Russian government really trying, unlike the USA government. For example the Russian government does not try to revive the economy by printing money, borrowing money etc., but by SAVING and giving money directly to small and medium entrepreneurs. For example the Internet Investment Fund, which Putin established in 2012 is a great success and internet related businesses already make for about 10 percent of GDP in Russia. Not bad in such a short time. People keep looking down on Russia, but if you realise that they started with the very idea of capitalism only in 1990s (they NEVER had anything like capitalism before) and I dont think we can really count 1990s, that was just looting and robbing by Western-backed Jewish oligarchs and chaos, not a free-market as such, so I would really start to count that from 2000, when Putin came to power. How long has it took for the USA to develop its capitalist economy? How many years? And the same goes for democracy. Why do Western people have such a stupid idea that you can just shake a magic wand and make a country, which has NEVER been democratic, somehow democratic overnight??? Some things need to be slowly developed, not imposed! Like Putin once said to Bush: "You know, we certainly would NOT want to have that kind of democracy like they now have in Iraq." A very smart answer and truthful. And Putin had another even more daring answer: "We are used to see that Western people like to colonize and nowadays democracy is just another tool used for colonization." It was a sincere answer from a non-Western man, who is protecting his own culture, his own traditions, his own nation against assimilation by the West (which would actually mean destruction for Russia). Many people just dont understand that Russia is not the West, they have had a different history, very different development - and yes, a bit different mentality. But is it so bad? They simply need to find their own way, not just to imitate the West. Why should everyone, every culture be the same??? But Western people have never been quite good at understanding different cultures, were they. They have always just tried to destroy them or assimilate them and then they are very surprised, when it mostly does not work the way they thought it would. Many countries will now be so relieved that the (forceful) influence of the West is on the wane.
+100
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... www.globe-report.com
GE can sell everything they have and they will never pay off their debt:
Total Cash (mrq): 15.92B Total Cash Per Share (mrq): 1.58 Total Debt (mrq): 364.98BReason #1: lots of investment gurus said to buy Russian stocks because the crash brought things down to very low PE ratios. Russian stocks are denominated in rubles, so this creates demand for rubles.
Fuck the EU as Victoria Nuland says. I hope the EU collapses!!!
agreed. i hope all nations collapse.
no government is legitimate.
If you're American, then you're a retard. The EU is an extension of US global hegemony. Or do you think that the US Govt. has been pumping cash into the Euro economy for nothing?
I'm sure it will be all shits and giggles if the EU fragments and descends into a writhing mass of fascist or communist regimes. Yet another series of banana republics that the US can add to its list of past allies.
If you're actually from Europe, I guess the statement is more understandable having had a non-elected and incompetent federal government thrust upon you.
So you think Germany, Holland, Sweden etc. would be banana republics without the EU?
Amazing.
Welcome to my gang!
Unless sanctions are lifted against their banks, the Ruble will probably continue to be a good bet. They can't get cheap credit from the ECB anymore. They have to borrow local. That means a 10-15% interest rate is not going to cut it. Their bonds will strengthen along with their banking system and currency as they lower rates to accomodate borrowing demand. And yeah. It is all due to Obama's sanctions. But anything is possible in fantasy number land. So who knows?
LOL!! Why all the concern for Russians? They seem to be doing fine despite "losing the cold war".
because it crashed in Dec? Is this news?
Yes, December.
Back in November they announced a free float policy. That they would allow the Ruble to finds its own level with the result we saw.
The problem is that they have ended that policy and intervened in the market today to weaken the Ruble by adjusting certain central bank / interbank interest rates. In order to protect Russian banks who had shorted the Ruble. Bad move. If they had wanted to weaken the Ruble it would have been better to buy precious metals with Rubles so as to lower the value of the Ruble.
Getting free from the global shadow banking system would instantly enrich a country and send the standard of living through the roof for the people. It's amazing how well you do when you don't have a giant blood sucking parasite taking all your wealth and enslaving the population.
Risky business. Hitler, Sadam and Ghaddafy all tried it and all came to a sticky end.
yet it somehow doesnt work with Putin, does it....even if the USA puppets still keep blabbering about a "regime change". Putin's support is still sky-high. Most Russians get into a transe, if they just catch a glimpse of him. It was really amazing to see. It kind of reminds me of Beatles Mania, only this is about a politician, not a rock star:-) There wont be any regime change. And even if something happened to him, there will NEVER be a Western puppet in Russia again. Russians are too pissed off at the West. The second largest party (the actual Putin's opposition) are the communists! The third party are even more hard-core nationalists. No one backed by the West has even the slightest chance of getting anywhere close to power. Russians have it in their blood to resist attacks from the West, they have been doing it for centuries.