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Russian Rouble: March Report

By Smart Currency March 20th, 2014

20 March 2014

Magadan cathedralRUB (Russian rouble) Current Rate:
RUB 59.4780/£1; RUB 36.0600/US$1

The spotlight has been shining brightly on Russia on the global stage, but reviews from the market have been muted on the whole. Having facilitated the secession of Crimea from Ukraine by means of a referendum which saw nearly 97% of votes in favour of Crimea being absorbed into the Russian Federation – a move widely contested in the West, particularly by the European Union (EU) – Russia then went on to sign a treaty accepting Crimea into its ranks.

Geopolitical events usually have an impact on the economy, and thus on currency market movements. However, markets have reacted relatively little to the sequence of events, with the media designating the soft approach by superpowers like the US and EU as a ‘slap on the wrist for [Russian President Vladimir] Putin’. Cautious of implementing hard-hitting sanctions that might upset their weak recoveries, the lack of decisive action by the US, EU and United Kingdom have been priced into markets, resulting in less-than-dramatic movements in most currencies as a result of the situation in Crimea. The only major changes have been to the rouble itself, which has weakened against its major currency partners. Traditionally safe-haven currencies like the Swiss franc and Japanese yen also saw some movement, but the effects of these were fleeting as markets normalised.

The Central Bank of Russia (CBR) appears to be facing the mammoth task of supporting a weaker rouble in the months ahead. Weakening on the whole prior to the Crimean crisis, the rouble dropped faster given Russian intervention in the situation. This has cost the CBR $20 billion in support of the rouble through methods like selling reserves. The Crimean crisis has also escalated capital flight from Russia, and the central bank has currently made no move to cap this, to the further detriment of the rouble. This may appear like an impractical move from an economic standpoint, but may serve a political purpose, as capital flight into the US, EU and UK – vital to the recovering economies – may be among the reasons why Russia is not facing tougher political backlash over its Crimean interventions.

Given that the situation is constantly evolving, it is very difficult to predict what will happen to the rouble. Initial forecasts at the beginning of March predicted that the rouble would gain strength (see table below) but because of the situation in Crimea, the reverse is happening. Businesses purchasing or selling roubles will find the currency climate in which they tread mercurial in the upcoming month. As such, we would advise that they have a clear advance strategy for minimising risk on rouble purchases and sales.




Rate forecasts for GBP/RUB:

Time Length Rate
1 month 58.9300
3 months 57.7500
6 months 57.8650




Forecast accurate from 18 March 2014. Data taken from Reuters’ poll.
Data sourced from GBP/USD and USD/RUB cross.


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This information in this report is provided solely for informational purposes and should not be regarded as a recommendation to buy or sell. All information in this report is obtained from sources believed to be reliable and we make no representation as to its completeness or accuracy.