The Reasons Behind Russian Ruble's Rampant Decline - East Idaho News
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The Reasons Behind Russian Ruble’s Rampant Decline

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Getty 121614 RussianRublesiStock?  SQUARESPACE CACHEVERSION=1418751709328iStock/Thinkstock(NEW YORK) — The Russian ruble’s abrupt fall on Tuesday is part of a year-long drop by more than half the value of the currency.

Back in Dec. 16, 2013, one ruble was worth about 3 cents, according to S&P Capital IQ. In reverse, a dollar was worth about 32.90 rubles back then. Fast forward to Tuesday, when it fell as much as 20 percent before recovering to 72 for every dollar.

The rampant decline of the ruble is the result of many different variables, according to Lindsey Piegza, Sterne Agee’s chief economist, including a fall in oil prices, one of the country’s major commodities.

The flood of rubles out of the country, as Russian businesses and consumers try to buy foreign imports that are getting more expensive by the day, has led to a fall in the currency, especially compared to the dollar and euro. With Russian confidence in their economy faltering, the ability to buy things with the ruble becomes more tenuous.

Overnight, the country’s central bank raised its benchmark interest rate to try to slow the ruble’s slide, hoping Russians would keep their rubles in bank deposits for example, with a higher return on their money.

But the plan only worked momentarily.

Declining oil prices and several rounds of sanctions that harm investors and businesses are among the drivers of the ruble’s fall, Piegza says.

Domestic policy hasn’t helped either. The Russian government threatening the seizure of foreign-owned assets is cause for concern and has caused a lack of confidence in the country’s ability to rebound, resulting in billions in loans coming due rather than being renewed, Piegza says.

“Clearly foreign investors are concerned, in some cases pulling funds out of the troubled nation,” she said.


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