The Russian Rouble has been falling madly for the past month. This is even with the Russian government trying to shore up the rate on the currency markets and this week increasing interest rates dramatically. Last week (9th Dec 2014) the BBC reported how the Kremlin was buying up Roubles to try and stablise the price and you can see te plateau on the chart below where they were doign this. (see the BBC for more on this http://www.bbc.co.uk/news/business-30391881)
Since the beginning of this week the Kremlin has increased interest rates to a staggering 17% (source. The BBC) and whether this will have any effect is debatable and in my opinion won’t. As soon as the markets take fright then there is little that will stop them jumping ship and heading to safer currencies.
It is predicted that the Russian economy is going to shrink by about 0.7% next year so they are not just looking at immediate and short term issues but longer term ones as well.
The causes of the problems are largely the sanctions in place over the Ukraine and anexation of Crimea and the falling oil price. The oil price may well bounce back but there is no way that Putin is going to lose face and back down over the Ukraine.
The most common question we ever get asked is ‘is now a good time to buy..?’ and just add your favourite currency. So is now a good time to buy the Rouble? In my honest opinion no. I really think it is going to fall further and if you bought now you could see hundreds of pounds wiped off your spending money in just a few days if things continue as they have.
Last week the Russian central bank increased interest rates by 1.5%, this week is was by 6.5% if that doesn’t look like panic then what does?