Whether the ruble to fear of currency crisis in developing countries?
Speaking about the prospects of the Russian ruble, more market participants switch from the sanctions of the topic and policy of the future Cabinet on possible new crisis in developing countries. The fall of the national currency emerging markets at the end of last week was the highest since November of 2016, when markets were shaken by the victory of Donald trump in the presidential election in the United States. Currency index JPMorgan for this group of countries fell by 1.7%. The situation smacks of a new crisis, it is particularly alarming on the background of the rate hike cycle by the fed in the USA.
Last week, Argentina, Colombia and Paraguay has canceled plans to host debt by $2 billion due to rising interest rates in the United States. The main problem the country is Argentina, where a substantial budget deficit and high inflation. The crisis is in full swing. The Argentine Central Bank raised interest rates from 27.25% to 40% in three stages in just seven days. Pessimists believe that the market began a long-term trend of strengthening of the dollar, which means that all the assets of developing countries will be under pressure.
Whether the Russian ruble and the currencies of the countries-partners of Russia in the Eurasian Union, Belarusian ruble and Kazakh tenge, the fear of a new crisis? Once the Asian crisis of 1997 brought to the Russian devaluation and default of August 1998. The Bank of Russia targets inflation, not exchange rate, that is not the fact that will support the ruble.
However, not all so is terrible. And it’s not that unlike 1998, Russia is no acute problem of sovereign long. And for the ruble and the budget is a very powerful factor of support for oil. Oil prices are at a very comfortable level. Further dynamics of the prices for oil will largely depend on the U.S. decision on the nuclear deal with Iran. It must be made before the end of the week. The likelihood of us sanctions and the rise in oil prices high.
However, we should not forget that in the short term, the ruble will naturally be exposed to the volatility of global markets that may force the Bank to hold off further reduction of the key rate.
The Director of analytical Department,