The Ruble hit its lowest level against the dollar in 2 years on Wednesday – as the greenback made strides against all the major currencies. Analysts say Russia's currency will track oil prices, which have been falling.
World currencies are being affected by the global financial crisis and the Russian Ruble is no exception. The Russian government and the Central Bank are expected to supporting the Ruble in the short term, but, according to Stanislav Ponomarenko, Analytical Department Head, at ING bank the outlook for energy, which makes up nearly 80% of Russia’s export earnings, is likely to determine the fate of the currency over the longer term. “However, if we look to 2009, 2010 – two years from now – and the oil price doesn't recover, and if Russian corporations and banks still can't access external capital markets – then Russia would be the net seller – rather than a net buyer of hard currency. Then, the Central bank might allow the Ruble to weaken.” Some members of the country's business community, including Boris Titov, Chairman, of Delovaya Rossiya are calling for long-term strategic measures to support not only banks, but also real sectors of the economy, while noting that the fall in the ruble has an upside in terms of the competitiveness of domsetic producers. “This fall of the Ruble influences the general trend in the economy and to some extent its good because domestic producers are more competitive on the Russian market and abroad. ” On the other hand it makes the economy more volatile. A third of the state budget comes from energy. If oil does stay at its current level for several years, it could mean cuts in spending and drawing on existing reserves. But for the time being Vladimir Osakovsky, Chief Economist, Unicredit Aton, says the reserves in place provide for a more stable economy. “Russia has accumulated huge amounts of foreign exchange reserves which act in these very volatile times as a source of stability for Russian economy as a whole. And it is very important that Russia has such reserves now – over half a trillion dollars.” Analysts say the Central Bank's current support measures for the Ruble will be evaluated over coming weeks. The CBR holds a meeting with commercial banks on Thursday and is expected to discuss whether banks are passing liquidity on to companies and the general economy. Rouble slumps against dollar Russia and the unfolding global recession G7 members act to head off global financial meltdown