Yesterday, central bank of Russia announced of rate of rouble released – no longer having to wobble within a corridor as kept there by support buys while burning the precious cash reserves. To justify the step, avoidance of anti-rouble speculations was cited.
Not a bolt from the blue: earlier data said this was planned by New Year anyway. The news also brought some slight rise to rouble, yesterday.
To understand what’s going on, let’s look at the broader backdrop. For a year, rouble has been falling. In November 2013, a euro cost 43.8 roubles (ECB rate). Last week, to buy a euro 57.5 roubles had to be handed over. In the exchange spots in Russian streets, one will naturally be asked for more.
Behind this, there lies the overall weakness of Russian economy, the stalled growth and, first and foremost, the dropping oil price eating away at export revenue and applying pressure on national budget. Secondly, impact of Western sanctions is seen to be having an effect. Probably, the main factor may be the psychological aspect – the insecurity, the negative expectations, the total unpredictability of Russia’s short-term behaviour in spheres both political and economic.
For Russia, letting the rouble float was a moment of truth – no longer able to protect the rouble, the central bank is trying to stabilise the rate at some lower level yet if need be, as dictated by market forces. Interviewed by Novaya Gazeta, the well-known Russian economist Sergei Aleksashenko currently working in Washington says that as the recent fall has been the panicking kind, the rouble ought to get a bit stronger in the nearest future. Meanwhile, he envisions rouble lose a fourth or fifth of its value in three years.
According to Russian business news channel RBC, currency buys of Russians multiplied many times over from September to October this year. Mostly, it was dollars that they bought, euro being less sought after. For the common Russian, rouble rate worries are nothing new. Traditionally, many immediately change their wages into dollars, then shifting back to their daily roubles for groceries etc.
No final security in that either – as insolvency hit Russia in 1998, some currency exchanges closed doors for a time and the ATMs quit giving money. This year, already the people in Russia have run in currency buy limits at banks: dollars and euros in cash granted to own clients alone, or needing to be pre-ordered.