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The Russian Ruble Continues to Fall, Loses 40% in 2014

The Ruble has crashed to 46 to a dollar. The currency has fallen from 32.6 in Jan 2014 to lose more than 40% in 10 months.

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Russia increased interest rates by 1.5%, taking the interest rate to 9.5%  but that hasn’t seemed to have helped much.

There are two ways to look at it.

  • People who own Rubles have to pay 40% more than last year for buying something for the same number of dollars. That computer costing $1,000 has gone from 32,600 rubles to 46,000 rubles.
  • People who invested from abroad into something in Russia – say Russian bonds – have lost 30% on their investment. If you bought 32,000 rubles last year paying $1,000, the same rubles would give you just $696 today.

The impact will be felt in many ways.

Russia exports crude, and the crude price has crashed over 20%. However, in ruble terms, it’s probably gone up!

Russian companies that issued dollar denominated debt (much like our ECBs) will have to pay many more rubles (40% more) to compensate for the depreciation. Some may have hedged this exposure but given the ruble was stable for many years, possibly not. The  Russian Central Bank may sell forex reserves in repurchase auctions to help.

Russian exporters will benefit, at least in ruble terms. Here’s a list of winners and losers.

In India, we import a little bit from Russia ($3.9 bn), like:

  • Diamonds ($750m)
  • Potassic fertilizers ($354m)
  • Silver ($324m)
  • Copper, Rubber, Newsprint etc,

This will get cheaper to import, in rupee terms (the rupee has been relatively stable this year with the dollar, so it would gain as much against the ruble)

Our exports to Russia could be in trouble. They were $2.1 billion last year, but will be relatively lesser. We largely export Pharmaceuticals ($525 m), mobile phones ($115m) and Tea ($108m).

One big impact would be tourism. Goa is flush with Russian tourists. The number of charters coming into Goa was expected to drop to 500 from 900 , but that was at 42 to the rouble – which has fallen another 10% since. Tough times.

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