Russia: Ruble trades below 50 for first time since November

The ruble has been on a relatively steady upward trajectory since the beginning of the year, and yesterday traded for the first time under the exchange rate of 50:1 on the dollar since last November. In total, the currency has regained 22% of its value. Most analysts point to rising oil benchmarks and Russian sovereign bond auctions seeing a huge amount of participation. Less politically minded rhetoric coming from the Kremlin and a lack of talk on additional sanctions from the EU or US have reduced the risk of being cut off once again from Western capital markets.

However, most are equally as pessimistic that the recovery will be short-lived, as the Russian Central Bank has announced it intends to cut its key interest rate again at the end of the month, which makes the currency’s inflation relative to the dollar more likely. Sacrificing this exchange rate is also an insight into priorities for the Russian economic planners, as access to credit and liquidity seem to be larger initiatives than the short-term value of the ruble. It should also be noted that many analysts seem to think that oil price shifts alone cannot explain the rise in the ruble’s value, as most notice a decoupling between the two. At the FT, the best guess is that companies are selling their rubles and buying FX to cover their external debt.

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