The ruble has fallen out of favor with Russians at the fastest pace in more than four years, according to data from the central bank, Bank Rossii. The primary cause is due to the ongoing standoff between Russia and pro-Russian separatists and Ukraine’s military. Within the first three months of 2014, the ruble fell nine percent against the greenback and eight percent against the euro. It has rebounded slightly, but the increasingly violent interaction between Ukraine’s military and pro-Russian separatists is worrying.
Data showed that foreign currency was in high demand, primarily the US dollar and euro, with total demand at $14.9 billion in March. This was the highest level since Russia’s recession in 2009, which was brought on by a combination of falling crude prices and potential war with Georgia.
According to a statement released by the central bank, “in March 2014 amid the continued weakening of the ruble against major world currencies and the uncertainty of further declines, the aggregate demand for foreign currency has increased dramatically.” Demand was 1.5 times higher than in February when Russian President Vladimir Putin said he had the right to invade Ukraine and annexed Crimea.
Russians also were eager to withdraw foreign currency from their bank accounts totaling $6.9 billion, a record-high with the majority of accounts being dollar-based.
The Russian economy has been stricken with sanctions in reaction to Putin’s divide and conqueror tactics. The fall of the ruble is likely to continue over time, and the Russian people should continue to hedge their exposure to their own currency.