Rouble devaluation

It has been an expensive white-knuckle ride. But Russia’s step-by-step rouble “depreciation” since November appears to be in sight of the finish gate. Russia has upped the pace since the new year with six mini-devaluations, widening the rouble’s trading corridor against a dollar/euro basket.

It has now fallen 8 per cent against the basket this year, and 29 per cent since last August. Some believed pressure on the rouble was increasing and Russia might be forced into the sizeable one-off devaluation it has sought to avoid. But Arkady Dvorkovich, the Kremlin’s economic adviser, on Monday ruled that out, suggesting the currency was approaching the level where the current account balances.

Separately, Russia’s government published new budgetary assumptions based on Urals crude averaging $41 a barrel in 2009 – $3 below current levels – and an average exchange rate of Rbs35.10 to the dollar. That represents a further 10 per cent devaluation, less than is priced in by the forward market. The rouble would again look overvalued if oil prices dropped further. But if Russia can stabilise the rouble at that level for a while, Goldman Sachs notes, its total devaluation will be similar to other commodity-reliant markets such as Brazil, Chile and South Africa. The sense among foreign investors of an economy gradually unravelling may ease.