The troubled Russian ruble has again fallen prey to the Kremlin’s assertive foreign policy. To the ruble’s credit, it has shown remarkable resilience despite negligence from the government, albeit even minor support from the monetary authorities could have somehow stemmed its free-fall.
Moscow’s dodgy policy towards Ukraine has caused serious repercussions in the international arena. So, the ailing Russian economy and the national currency have bleak prospects amid escalating geopolitical jitters. Large financial institutions are already dumping ruble-denominated assets. US financial behemoth JPMorgan decided to scrap its long bets on the ruble, citing high uncertainty over the standoff between Moscow and Kyiv. Strategists had to admit that they undervalued substantial risks. As a result, the bank’s investments ended up with heavy losses. As of now, JPMorgan has ditched its long positions on the ruble in full.
“Our existing long recommendations have become untenable,” the bank’s analysts wrote in the note to clients in early 2022. “We cannot with high confidence dismiss negative scenarios.” Other Western investment firms echo their colleagues from JPMorgan. Unfortunately, the Bank of Russia also confirms the aversion of foreign investors who lost interest in the Russian currency in October 2021. Due to escape from the Russian assets, foreign investors sold Russian government bonds worth $3.4 billion last year. Overseas investments in Russian stocks also contracted by $13 billion. All in all, the Russian ruble was recognized as the weakest emerging market currency in early 2022 because of the threat of a full-blown military conflict that could be unleashed by Russia. Sadly, the Russian currency slumped by 5.4% in January alone despite a stunning rally of oil prices that ensures a steady flow of US dollars into the Russian economy.
