The Russian ruble’s growing strength in 2015
The ruble owes its strength to tax payments that exporters will make this year. The exporters are required to convert their earnings in foreign currency into rubles. This has led to the large volumes of forex for sale. The other fundamental factor was a drop in the size of scheduled foreign debt repayments. Russia’s external debt has dropped from an all-time high of $732.80 billion in 2Q14 to $556.2 billion in July 2015.
The large tax payments to be made require conversion of foreign currency into Russian currency. Also, the Russian government is currently requiring fewer dollars for the repayment of foreign debt, owing to its large forex reserves. This has certainly added to the country’s credibility. Thus, the Russian ruble is showing a low correlation with oil prices right now.
Russian stock market scenario
The VanEck Vectors Russia ETF (RSX), which provides exposure to the publicly traded companies that are domiciled in Russia, registered a gain of 0.614% from July 13, 2015, to July 17, 2015, showcasing an optimistic stock market.
The RSX YTD (year-to-date) return surged 14.81% as of July 24, recording the highest return of 40.84% YTD as of May 15. The YTD returns as of July 29 of Rosneft (OJSCY), LUKOIL (LUKOY), Surgutneftegas (SGTZY), and Gazprom (OGZPY) are 12.25%, 4.33%, 33%, and 1.75%, respectively.
In the next article we’ll look at the changes within the Russian stock market.