Russia considers devaluing the Ruble!

[dmhweb 0]

Not good news...

http://www.reuters.com/article/reutersEdge...E4AK4L620081121

"It would probably be better from a macro-economic point of view to allow the ruble to float freely," said one senior Russian government official, speaking on condition of anonymity.

"But if we do, there is a risk that it will overshoot, fall as much as 50 percent and trigger a run on banks."

http://online.wsj.com/article/SB122722633203246081.html

"The government has insisted there is no serious crisis and that Russia is much better off than Western countries, airing public reassurances on state television." ... LOL

[mox 298]

De-valuing the ruble HAS to happen. There's no way Russia can support it at its current levels. And yet, when they do...they're going to have a worse economic collapse than the US. Things are about to get pretty bad for Russians I fear.

On a positive (for us) note, if the ruble collapses it might be a good time to buy some up for future visits.

[Neonred 3,562]

We have a bank account, essentially a CD, in a good Russian bank invested in rubles. Over the past year it was yielding over 9% plus the gains with the falling dollar/strengthening ruble. It came up for renewal a few weeks ago and a trusted friend inside the bank told my stepdaughter (who is finishing her university degree in banking and finance) to take that money OUT of the bank because most insiders feel a strong possibility of it loosing much of its value. Time to reinvest in dollars?

Wanted to add that recently another friend wanted us to invest in a VIP account in another Russian bank (in rubles)with a return rate of 24% a year. When it sounds too good to be true.....

Edited November 21, 2008 by Neonred

[mox 298]

We have a bank account, essentially a CD, in a good Russian bank invested in rubles. Over the past year it was yielding over 9% plus the gains with the falling dollar/strengthening ruble. It came up for renewal a few weeks ago and a trusted friend inside the bank told my stepdaughter (who is finishing her university degree in banking and finance) to take that money OUT of the bank because most insiders feel a strong possibility of it loosing much of its value. Time to reinvest in dollars?

Wanted to add that recently another friend wanted us to invest in a VIP account in another Russian bank (in rubles)with a return rate of 24% a year. When it sounds too good to be true.....

If it were me, I'd re-invest it in Euros. I think the Euro will recover faster than the dollar.

And when she withdraws the money, have her be careful. I just heard a story on NPR last week that Russians were tripping over themselves to get their money out of the banks, only to be followed and robbed on the street.

[russ 1]

And when she withdraws the money, have her be careful. I just heard a story on NPR last week that Russians were tripping over themselves to get their money out of the banks, only to be followed and robbed on the street.

Bigger issue is the exchange rate, where the dollar is trading higher on the street than it is in banks. The ruble will almost certainly weaken further, as the government will run out of money to be buying rubles to support the exchange rate. The drop in oil prices will worsen this pressure.

The ruble is managed against a basket of 55% dollars/45% Euros. The weak dollar made things easier on the bankers last year. With the Euro trading at more historically normal levels now ($1.19 when the euro started, it is $1.25 today), ruble weaknesses will be harder to hide.

I would not want assets priced in rubles now - the high interest rates are telling you that inflation and devaluation are being priced into the market here.

USD assets are a bargain though. I would expect an exchange of 35 rbl/dollar by next year.

[slim 1,525]

"I love Goooooooooooold."

[Brad and Vika 129]

There is a good reason that investors do not flee to the rouble in troubled economic times. I agree that the ruble may be devalued next year - primarily because it doesn't float. Because the primary market is so heavily government controlled in Russia (see the frequent market closures), the rouble cannot float any more than the yuan can without a fundamental change to the system. IMO no one should engage in rouble-based currency speculation with money they need later. In other words - stay away from the rouble unless you are on vacation in Russia or something. For safety hold dollars, euro, or pounds.