Currency Trading - Russian Ruble Trouble

June 25th, 2009 by admin

Why the Ruble Is Heading South

The recent drop of over 20% on the Russian stock market has me thinking about Russia and what’s coming next for Russia in the coming months and quarters…

The Russian Central Bank has been trying to help with the liquidity crises. They’ve been slashing interest rates in a big way. Of course, that’s also caused the ruble to drop dramatically in value.

The recent economic data suggests some tough times ahead for Russia (even with oil climbing higher!) Andrei Klepach, Russia’s deputy minister of economic development, just announced that real GDP contracted by 11% year-over-year (YOY) in May. Real GDP also contracted by 10.2% YOY over the first five months of this year.

That’s not all. It’s expected that Russia’s second quarter GDP number will decline about 8%. For the whole year 2009, economists are saying GDP could contract by 6-8% year-over-year. Meanwhile the IMF has forecast the drop to be around the 6% mark. All of this seems to clearly indicate that the recession is deepening in Russia.

Let’s see what other indications we can get on the economy:

  1. Industrial output fell by 17.1% YOY in May. Output also dropped by 16.9% YOY in April, and 15% over the first four months of this year.
  2. Retail sales dropped by 5.6% YOY in May, after falling 4.5% YOY in April, and after falling around 1.4% YOY over the first four months of the year.
  3. The only silver lining on the horizon is that unemployment rate eased back to 9.9% in May, from 10.1% the month earlier.
  4. The trade deficit has slowed down to $9.8 billion in May. For the first five months of 2009 this put the trade surplus at $36.3 billion. It stood at S$83.3 billion one year earlier. Exports were lower by 47% YOY over the first five months of the year, with imports down by 40% YOY.

The combination of the weak real economy outlook, plus the dramatically lower trade surplus suggests a coming weakness for the ruble.

 

By Ashish Advani - worldcurrencywatch.com

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Posted in Currency Markets, Currency Today, Currency Values, Current Currency, Markets
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