Russian ruble set for positive rebound?

Photo credit: John Leach

The Russian ruble is showing signs of a positive rebound this month, with the currency's value climbing for the first time since January 2016. The currency had a poor 2015, causing investment in overseas countries' real estate to plummet. This week, though, the ruble gained 0.5 per cent against the dollar, with Bloomberg now pegging the currency at 2.9 per cent growth this month.

The currency was boosted by positive economic data for January, with retail sales and real wages declining by a smaller amount than expected and unemployment levels remaining steady. A climb in oil prices also played a part.

"The data is decent," Oleg Kouzmin, an economist at Renaissance Capital, confirmed to Bloomberg. "But while oil price fluctuations are this strong, especially in percentage terms, we have no other way but to follow them.”y

Indeed, Russia's volatility, which is measured by exchange-rate swings, is the highest of all emerging markets, except for Argentina's peso, notes the news agency.

The rest of the world is also experiencing volatility in the currency market, according to JP Morgan Chase & Co., whose index of swings in exchange rates averaged more in February 2016 than any other month since 2011. In response to the volatile conditions, the OECD this week reduced its global growth forecasts for a range of countries, also warning of the risks of currency volatility to emerging markets.

Overall, global GDP will expand 3 per cent this year, according to the OECD, matching 2015's growth. The US is forecast to grow 2 per cent this year and 2.2 per cent in 2017, weighed down slightly by the strong dollar's impact upon the country's exports, while Germany is forecast to grow 1.3 per cent and 1.7 per cent respectively.

Russian investors, though, appear to taking some positive encouragement from the ruble's signs of strength. According to Tranio, Russian investment in commercial property overseas could grow by as much as 30 per cent in 2016, a significant turnaround from the halving of overall real estate investment last year.

The Central Bank of Russia, meanwhile, reports that as 2015 drew to a close, foreign property purchases by Russians rose for the first time since the spring of 2014.

"The most important aspect of Russian investments after the ruble crisis is the search for yields via individual buy-to-let residential property or commercial real estate, predominantly in Europe," comments Tranio.