- Wealth PMS (50L+)
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.
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.
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:
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.
To subscribe to new posts by email, once a day, delivered to your Inbox:
Also, do check out Capital Mind Premium, where we provide high
quality analysis on macro, fixed income and stocks. Also see our
portfolio which has given stellar returns in our year, trade by trade
as we progress. Take a 30-day trial: