Ultimately, the new measures presented in order to regain the smooth sailing of the economic status of the country are expected to lead Russia’s managed Forex accounts towards a stricter approach where they don’t have to swap dollars to roubles just to catch up.
Naxxar, Malta -- (SBWIRE) -- 12/22/2014 -- The ailing economy of Russia is dangling on the ropes as the currency collapsed within a matter of days due to falling oil values. The central bank intervenes and forcibly starts selling FX to hike its key interest rate by 650 basis points as an emergency move to least support the currency.
The attempt of the finance ministry to throw $7bn in reserves has gradually raised the rouble's value by 3% against the dollar at 65.52 and is 4.2% stronger versus the Euro at 81.50. Despite the humble upturn of the currency, the rouble was still down to almost 50% against the dollar this year that stirred many of the 1998 crises when the currency first plummeted.
Strengthening of the roubles may look artificial and could be an errant export that convinced the authorities to sell Forex. Still, the intervention of the Russian central bank to defend the rouble, despite the efforts, has been dragged lower by falling oil prices. Furthermore, the huge impact of the dollar jump against roubles made imports immensely unaffordable for many Russian consumers, thus hurting the economy badly.
The situation had pose major challenges for President Vladimir Putin whose popularity was put to a great test after the rouble's decline that is damaging Russia's reputation among investors. But the Prime Minister, Dmitry Medvedev, tried some verbal intervention by assuring Russians not to worry for the reserves were deep enough to be knocked down by the financial crisis.
Yet, the third spike really spurred the rouble that the Central bank has to devise a strategy to restore the Soviet Union's financial stability and contain the effects of the collapse. As Russia slowly rebounds back as the price for oil soars, the Central Bank of Russia released the English version of the 'seven (7) measures to maintain stability', that states the following:
1. Introduction of a temporary moratorium on the recognition of the negative revaluation of securities portfolios of credit institutions and non credit financial institutions.
2. Providing credit institutions temporary right to use the calculation of prudential requirements on transactions in foreign currency rate.
3. Improving the mechanism of credit institutions in foreign currency
4. Considering the central counterparty on the Moscow Stock Exchange as an important institution for centralized distribution of liquidity among all financial market participants (both credit and non-credit institutions).
5. Empower interest rate risk management.
6. Enhance the management of credit risk by giving opportunity not to impair the quality assessment of debt service regardless of the assessment of the financial position of the borrower on the loans restructured
7. Recapitalizing credit institutions in 2015 in order to maintain the stability of the banking sector in the face of the increased interest rate and credit risks.
Ultimately, the new measures presented in order to regain the smooth sailing of the economic status of the country are expected to help Russia's managed Forex accounts towards a stricter approach where they don't have to swap dollars to roubles just to catch up.
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Lanova Investments' investment philosophy emphasizes the importance of compounding long term capital growth associated with equity investing while maintaining flexibility to shift asset allocations away from equities when our outlook for that asset class is highly negative. Depending upon the clients' individual needs, they actively manage the allocation of assets between stocks, bonds, and cash based on their risk and return expectations for each asset class. Their Investment Policy Committee uses several proprietary models in conjunction with years of industry experience to determine the optimal allocation.