East Capital’s chief economist explains ruble’s slide

The chief economist of East Capital, a Stockholm-based emerging and frontier market asset manager, argues there are five main reasons for the sharp depreciation of the Russian ruble over the last several months.

One reason is Russia’s generally weakened economy, which has produced nearly zero growth this year, another is the Ukraine crisis with the sanctions, capital flight and deteriorating business sentiment it has entailed, and a third one is a 20% fall in the oil price over the past few months, Marcus Svedberg says in an article.

Russia’s economy is heavily dependent on oil exports.

One more factor is the US dollar’s rise against almost all currencies due to the United States’ increasingly robust economy, tapering policy and anticipated rate hike, according to Svedberg.

The fifth reason are decreasing interventions by the Russian central bank that preceded its decision a week ago to abandon the ruble’s trading corridor and let the currency float freely as from next year, Svedberg says.

The ruble climbed versus the dollar slightly after the free-float decision was announced.

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