Rubbled Rubles
The Russian Ruble is the national currency of Russia and is also the second-oldest currency still in circulation, behind the British Pound. It is made up of 100 kopeks. Despite this long-standing history, the Ruble facing dire times as Russia’s invasion of Ukraine fails to make clean-cut progress. The war or Russia is not only costing money, lives, and more, but costing them geopolitically with sanctions from their biggest trading partners like the U.S and other European countries. Adding fuel to the fire, Russia may be facing a prospective default. Indeed, Russian Finance Minister Anton Siluanov said Wednesday that it is up to the U.S. to decide whether interest payments on two dollar-denominated Eurobonds go through.
This statement heightened worries that Moscow could face its first foreign currency debt default in over a century. More specifically, Siluanov said that “The possibility or impossibility of fulfilling our obligations in foreign currency does not depend on us, we have the money, we paid the payment, now the ball is on the side, first, of the American authorities. The Russian Federation has the necessary money in foreign currency accounts, it is possible to pay in ruble settlements.” Keep in mind that this statement is coming from Russian media. Within the global public sector, Russia’s burden to pay back grows while also becoming increasingly difficult as sanctions mount and the war goes on with little progress. One example of sanctions power over Russia’s ability to repay includes the move to effectively freeze the Central Bank of Russia’s roughly $630 billion foreign reserve stockpile. In the private sector, Russia’s troubles aren’t over, with Russian assets viewed as toxic and highly unstable by many market participants. What do you think about this? And could it present some interesting foreign exchange situations for investors?
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
