Outlook for ruble: recent rally will be short-lived

The Russian ruble has rallied over the last two weeks, gaining 3.4% since the end of last month. However, economic analysis suggests the currency will weaken in the long term.

Ivan Tchakarov, Renaissance Asset Managers’ chief economist, the ruble’s “mini rally” has been largely driven by the surge in optimism and risk appetite in anticipation of monetary easing by Europe’s central bank and expected similar action from the US Federal Reserve.

At the same time, the ruble has seen an additional boost, as Russia’s bonds began trading on the Euroclear. This attracted increased inflows into the country’s debt pool.

Yet Renaissance argues that the rally is temporary and the currency can be expected to decline as global growth slows. This trend has already been reflected in Russia’s year on year GDP growth, which has decreased from 4.5% in H1 to 2.6% in July.

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