In 2015, the Russian national currency showed a stable rise after a recent decline. Some economic analysts explain that markets are overreacting to their initial overreaction, which implies a whopping overvalued exchange rate following a large depreciation. That is the reason behind a 34% increase in the ruble against the US dollar.
Economists believe that Russian exports need the stable but weak ruble. That is why the national currency rate is expected to slide against the greenback in the short term.
The WSJ said plunging oil prices forced the Russian government to channel large funds into national currency strengthening. Russia raised the interest rates and used funds from the Federal Reserve. The Bank of Russia offered Russian companies US dollar loans at the lower exchange rate in order to boost demand for the rubble.
The rubble is seen to be overvalued due to the fact that the market does not reflect the real value of the currency. Demand for a currency usually falls sharply when the currency rate reaches the highest or lowest levels.
Currently, the Bank of Russia has to hinder ruble strengthening amid high interest rates and low oil prices.
Most experts agree that the problem is likely to go away by itself in the near term. Danske Bank strategist Lars Christensen said that “the rate of ruble appreciation over the past couple weeks cannot be justified based on the development in oil prices”. He thinks the ruble will fall back to 65 per dollar in six months.
