Downside surfacing of an upside Rouble
A former central banker this week claimed the government wants to strengthen its currency further. Sergey Aleksashenko adds it plans to bring the rouble exchange rate down from 30 to 22 against the dollar.
According to the ex central bank deputy, Moscow calls the likely subsequent death of export-driven fertilizer and oil refining industry a "blessing", since that will force the economy to modernise. But Boris Lvov, Partner at KPMG in Russia and CIS, warns the hard currency is already damaging business.
“The appreciation of the rouble is definitely having an effect on margins because some of the cost advantages are disappearing for Russian companies. Too much of a strong rouble like it was before the crisis, at 23-24, is not very good for the Russian economy.”
Since March, the greenback's lost a quarter of its value against the Rouble.
Vladimir Preobrazhensky, CEO of SUEK, the country's top coal producer says that's hurting in more ways than one.
“It has had a negative effect on our earnings and our credit portfolio.”
Analysts believe the currency should be weaker, not stronger. On Thursday, rating agency Moody's said Russia's economy needs the Rouble to weaken 20%.