Tuesday, January 10, 2012

Ruble Sweats Amid Russian Turmoil

The Wall Street Journal reports on political risk in Russia impacting trading in rubles. The currency has declined 3% since the biggest political protests over election fraud.

Previously in 2011 the ruble generally had performed well, apparently due to Russia being a commodity-producer (the world's second-largest crude oil exporter) as well as an emerging market.

However, Russia also had $80 billion in capital flight in 2011, more than double 2010, according to the Russian government, a situation aggravated by political uncertainty.

While Vladimir Putin is expected to win the March presidential election, concerns over political stability remain, and investors recall Russian currency devaluations in 1992 and 1996.

Said one portfolio manager, "It's never good when you have people in the streets ... That could lead to more capital flight."

Beyond the ruble, Russian financial markets are down, and the Central Bank is not offering much support for the ruble itself.

However, high oil price forecasts could help the ruble, and progress on eurozone problems could make investors less risk-averse.

Financial analysts differ on the impact of the March presidential election.

Among concerns voiced by one fund co-manager: "'one quite clearly is the political noise which is around us and quite clearly will remain elevated ... We worry about the fact that we've seen how these protests have grown in the Middle East and even in other areas.'"

Read more at:  http://online.wsj.com/article/SB10001424052970203436904577151081723038406.html?mod=googlenews_wsj

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