Russian rouble down as s&p cut ratings

Photo: Waltie

The credit ratings company downgraded Russia to BBB-, one rung above junk, in response to the conflict in Ukraine. The crisis has already seen economic sanctions placed against Russia, which has encouraged a growing number of investors to take their money out of the country and invest in real estate abroad.

Indeed, S&P's statement forecast that the ongoing geopolitical situation between Russia and Ukraine "could see additional significant outflows of both foreign and domestic capital from the Russian economy and hence further undermine already weakening growth prospects".

Russia's rouble has already fallen 8.6 per cent against the US dollar this year, notes Bloomberg, the second-worst performance by the 24 emerging markets tracked by the news agency.

The downgrade was expected by many, while the currency's weakening has not stopped outflow of capital into foreign real estate investments.

S&P has warned, though, that it may continue lowering the rating further "if tighter sanctions were to be imposed on Russia and further significantly weaken the country’s net external position".

The pound sterling, meanwhile, remains steady, despite positive economic news: retail sales beat predictions to grow 4.2 per cent year-on-year in March 2014, while the central bank recently upgraded economic growth figures in the first quarter of the year.

At the same time, the US was struck by lower than expected US housing data, with the National Association of Realtors reporting that new home sales fell in March. Nonetheless, the British pound remains steady against both the dollar and Euro, seemingly requiring a bigger stimulus to boost its growth.