Russia Ruble Rumbles: Big Drop in Emerging Markets

Russia is grappling with the consequences of consistently low priced oil and tough sanctions. The ruble faced its, “biggest weekly drop in emerging markets” and may still have further to fall. Moscow is facing serious money issues as problems persist economically and politically.
“The currency pared initial losses to trade little changed against the dollar to 67.4309 by 1:53p.m. in Moscow, taking its decline in the week to 1.4 percent.” Meanwhile, Brent is the benchmark for Russia’s export blend and traded at a six-year low this week. OPEC oil-producing nations met on Friday but few expected any consensus on methods to, “boost the price of the commodity.”

Russia is struggling with its first recession since 2009, and the economic crisis is exacerbated by sanctions from its role in Ukraine’s conflict. Russia, “derives almost 50 percent of its budget revenue from oil and natural-gas exports, [and] is pumping crude at near-record levels…The price of crude in rubles sank to its lowest since 2011 last month and is trading 10 percent below its average for the past 12 months.”

Complicating matters is an imbalance between the value of the ruble to the price of oil. A Russian money-manager from Moscow, Vladimir Vedeneev, views the, “ruble as overvalued and said a level of 70 would be comfortable for the budget relative to the current price of oil.” The fact that the ruble has been unable to keep up with the drop in oil this quarter has caused, “an imbalance that translates into reduced government revenue from the nation’s top export earner in local-currency terms.”

Russia did see some development, with an improved credit-rating outlook from negative to stable last week. “A stabilization of external finances and a diminished likelihood of the economy facing a further intense shock in the next 12 to 18 months after being sanctioned over Ukraine.”

Russia (and emerging markets around the world) has had a volatile and difficult 2015. Our experts at Apex Financial Advisors have worked with countless clients to protect their wealth, offer solutions to market correction problems, and walk numerous individuals through investment strategies. If you have questions or concerns about your portfolio, talking to one of our experts can help. Call us today to start discussing your finances and finding options that work best for you.