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Russian Ruble Performance Improving

Last week saw a marked improvement in the Russian ruble performance where it rose in five straight days, something not seen in over six months.

As of opening of trading on Monday, the currency was up 5% to the dollar from the previous week.

The improvement in the Russian ruble performance has been attributed to a number of factors, most notably the recent increase in oil prices.

Also important is the corporate tax payments that are due into the Russian treasury this week.

The performance of the Russian ruble has been the second worst of any currency of 2014 tracked by Bloomberg. Only Ukraine’s hryvnia has performed worse.

Sanctions and import bans from the EU have led to an inflation rate recently calculated at 8.8% and set to enter double figures next year. This has forced the Russian central bank to hike interest rates up to 9.5%.

Real wages fell in August and September for the first time since November 2009 and the economy is currently on the brink of recession.

Free Floating Ruble

 

Many in Russia have praised central bank governor, Elvira Nabiullina for the allowing of the currency to float freely earlier than expected, thus preventing profiteering from speculators who were taking advantage of Russian propping it up.

It is estimated that $30 billion dollars of Russia’s reserves was used for this purpose in October alone. A small fraction of the estimated $460 billion reserves it has in total.

An upturn in the Russian ruble performance will be met with relief from Vladimir Putin, who has witnessed the currency decline 25% to the dollar in 2014 alone.

The fact that a large portion of the upturn has been put down to recent oil price increases has led to some analysts comparing oil and the ruble as ‘close siblings’, where the view on one equals the view on the other.

Early trading on Monday saw yet further increases to the dollar. A six day rally has not been seen from the ruble in 14 months.

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