Chart of
the Day - Russian Ruble or Russian Roulette
The Russian
Ruble has been amazingly volatile in the past 2 days but it has been especially
so today. The magnitude of the intra-day move is just mind-boggling. The
intra-day low was 52.2628 per US$ and high was 79.1688. That’s a massive 35.9% move
from the bottom to the top in one single session. This huge swing in Ruble occurred on the backdrop of a
6.50% increase in Bank of Russia's Key Rate to 17%, which followed 1% increase just 2 business days ago, on Friday.
In the short-run, the currency volatility might push Russia to impose capital controls. Russia has already spent ~$80 billion defending the currency before it gave up on November 10. The central bank realized that it could not keep spending so much of depleting reserves on currency intervention especially when oil revenue, which accounted for over two-thirds of exports, is falling rapidly.
In the medium, the state of Russian economy and its currency will depend on oil price. The Russian government's initial break-even price for oil was $100, but it lowered that to $80 after the OPEC meeting. If oil price stays below $60, Russia's Economic Ministry says economy will contract by 3.5%-4.0%.
Foreigners who hold Russian debt will be directly impacted by collapsing Russian economy and falling currency. According to the Russian Central Bank, $135 billion debt is due over the coming year - banks alone have $50 billion due.
Domestically, Russian oligarchs are not the only ones suffering from the plummeting Ruble. Because of currency volatility, Apple halted online sale of its products in Russia.
It will be interesting to see how all this plays out not only within Russia but also in the bigger geo-political context.
Russian Ruble
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Bank of Russia's Key Rate
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