We have seen reports over the last year which painted the Russian ruble (RUS) as one of the better performing currencies. The value of the RUS even gained as much as 15% against the US dollar (USD) earlier in the year. But these days, as investors appear to be fleeing towards traditional safe-haven assets, the ruble is beginning to experience broad declines. Are we seeing a trend reversal in the global economy, or is it something specific to Russia?
As one of the largest emerging market economies, Russia was benefiting from the speculative growth shifts over the last 3-5 years. Technologists and innovative organizations have even written on the growing need to focus new endeavors on the high growth economies of BRIC (Brazil, Russia, India, and China). What today’s uncertainty is now doing is pulling these speculative growth shifts away from those nations.
What appears to be happening is not so much an intrinsic decline in the value of Russia’s economy, but rather a move away from the more speculative, and therefore riskier, assets by international investors.
This is supported by the very recent downturn in Russia’s stock market. To underscore this point, consider that the RTSI Index has lost over 22% of its value over the last two weeks. The RUS is obviously affected by these investment shifts. Without something to address global uncertainty, it doesn’t seem likely that the RUS will recover its former uptrend in the near future.
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