Russian Ruble To Stay Strong Despite Oil Dropping

By: Free World Economic Report

 

The Russian currency is growing despite crude going down $5 a barrel since early March. Global oversupply has put a damper on forecasters prediction of Brent crude going up 16 per cent by years end. To prepare for a worst case scenario, such as OPEC talks falling apart, Russia has prepared a three year budget if oil falls down to $40 a barrel.

As most oil producing countries are taking a hit on their currencies, foreign investment continues to pour in to Russia. The lure of the high carry trade is a most definite reason.


RT.com

 Investors are still lured by Russia’s high carry trade return, spots an expert interviewed by Bloomberg.

“This is Russia’s paradox, which is still logical: lower rates, better economy, buy the ruble. The carry is good enough even with the upcoming gradual easing,” Vladimir Miklashevsky, a Helsinki-based senior economist at Danske Bank told the media.

Carry trade is a strategy that involves borrowing at a low interest rate, usually in the developed economies and re-investing in an asset that provides a higher rate of return like emerging markets.

“The Street is still bullish on the ruble, hence the resilience in the face of falling oil. Even if the central bank cuts the key rate, the carry trade will remain attractive,” Dmitry Petrov, a trader at Nomura told Bloomberg.

Despite the slump in oil prices, the Russian ruble has been one of the strongest global currencies over the last 14 months, gaining over 30 percent against the US dollar.

Carry trade is a strategy that involves borrowing at a low interest rate, usually in the developed economies and re-investing in an asset that provides a higher rate of return like emerging markets.


What the mainstream sites fail to mention is Russia and China’s desire to move away from the American Dollar.The BRICS alliance seeks to have their currencies backed by gold and move away from the west’s dominance over the global banking system.

Ever since Russia has kicked out the Rothschild banking cartel and many of George Soros so called charity organizations, their economy has approved. Foreign investors are also tired of the west’s complicated and vindictive banking system. Along with China, Russia is strongly pursuing to back their currencies with gold.

This will be a disaster for both the US and European currencies which depend upon quantitative easing (printing money out of thin air) to service government debt.

Than one must wonder why there is such a huge buildup of NATO forces  along the Russian border.

 

 

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