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Thursday, 22.09.2011
Ruble weakens, Euro hits the 43-ruble mark
Moscow. If one could only understand the foreign exchange: Everybody talks about the Euro crisis but somehow the Euro reaches new heights against the ruble. But in Russia there is no reason for a currency weakness - not yet.
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The Euro gained in one go 1.5 percent (around 70 Kopecks) against the Ruble, and today the Euro exchange increased again by 10 Kopecks. This was enough to reach the psychologically important threshold of 43 rubles at the official rate of the central bank.
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Only a "blip" - or a currency slide?
The official price tomorrow is 43.01 rubles, as high as the Euro was trading in autumn of 2010. The Dollar traded at 31.41 rubles.
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A number of stock market insiders speak of a "technical blip" and predict that the Russian currency will return soon to the established range with the Dollar being well below 30 Rubles and the Euro worth around 40 Rubles.
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But for now there is no turnaround in sight. Compared to the Bivaluta rating of 55 US cents and 45 Euro cent, the benchmark for the Russian currency - the ruble has lost 6 percent since the beginning of September.
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Euro and Dollar levels are in crisis - but the Ruble falls
With the oil price being the main indicator for the country's income and the current commodity level of $110, it continues to gain Russia a huge amount of foreign currency. A stable and high oil price has up to now been a guarantee that the Ruble would not lose its value.
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It seems that this law does no longer apply. Financial insiders believe that the current decline in the currency value is due to external factors - namely the general uncertainty in the financial markets.
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This encourages investors to sell their high yield but also risky stock options, which includes investments in Russia. With the sale of a large number of Russian shares, a huge amount of Rubles are being released into the currency market, which in return pushes the price of the Ruble downwards. "The current weakness of the Ruble has local character and can be referred back to the back flow of funds from the Russian market, says Alexei Kozlov, the Senior Analyst of UFS Investment Company .
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If confidence is crumbling, it will go downhill fast
Should however the current price decline encourage Russians to doubt the solidity of their Ruble savings and therefore start a mass exchange into Dollar and Euro then one could not talk about an imported crisis, but in fact a homemade Ruble crisis. Reports from neighboring Belarus, where the Ruble has lost a third of its value in one year, should have made numerous Russians feeling nervous.
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In the Russian currency market people feel certainly insecure. Nobody knows what will happen. This is reflected by the unusually large difference between bid and sale price of around 1 Ruble, reports the internet paper newsru.com. Many insiders would have expected a increase in Ruble value for today - but in fact the Russian currency remained on previous day's level.
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Hyperinflated Ruble - or acceptable level
Uncertainty prevails, but also at government level. A continuing strong ruble threatens to lead to a flood of imports and thus would affect the balance of trade as well as domestic productions.
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Vice Economics Minister Andrei Klepatsch said last week that as far as his office is concerned, the Ruble is inflated by around 10 percent - which caused a sudden heavy loss in the exchange rate.
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Four percent is not enough growth
Even as presently nothing points to a decrease of the Russian currency, given the stable economic indicators, in reality the worries are justified. The expected economic growth of 4 percent in 2011 to 4.2 percent in 2014 counts for nothing, say the experts in the Economic Analysis Center ZMAKL.
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In the interim, this will only cause be a moderate growth in Russian exports but will lead to a strong increase in imports. The only cure for this - the exchange rate.
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"A weakening of the Ruble is inevitable", says ZMAKL boss Dmitri Belousov. "Preferably a soft decrease rather than a sudden."
Original German text can be found here >>>
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