The Ruble's Calm Is Like a Swan

Other markets show a lot of paddling going on beneath the surface.

The ruble has rallied. Let's not get used to that.

Sure, there was a lot of sense behind the rout, what with the U.S. sanctions having been cleverly designed to seriously undermine the Russian economy.

Ruble Rollercoaster

The ruble has recovered more than half its losses on the week

Source: Bloomberg

Gold, a traditional safe haven, played its part and has tracked the ruble this week.

Golden Ruble

Gold has moved closely in line with the ruble this week

Source: Bloomberg

U.S. Treasury Secretary Steven Mnuchin was a big help in driving a return to calm. This week he removed one wild card from the pack, by ruling out the prospect of America extending its sanctions to encompass Russian local currency sovereign debt. This prompted a recovery in the ruble bond market, which in turn removed some of the liquidation pressure on the currency. A third of ruble-denominated bonds are owned by foreigners and a lot of these are American. And who can blame them? It's been a great trade.

Sanction Impact

The selloff this week in Russian domestic government debt abated when the U.S. treasury confirmed it would not widen sanctions to include the OFZ market

Source: Bloomberg

But Russia is not going to be let off the political hook on sanctions or for its involvement in Syria, and other markets seem to be reflecting this.

The Swiss franc, another paradigm of safety, has, surprisingly, weakened. Or maybe not so surprising -- Bloomberg News reports that this may be the impact of Russian oligarchs liquidating their assets. If foreigners are getting out of Russian holdings, citizens are bringing their money back home. 

Flight Out of Swiss

In a week of high stress it is strange to see the usual haven of the Swiss franc weaken

Source: Bloomberg

And maybe this explains why Bitcoin -- another potential means to transfer assets -- has soared. Maybe.

Crypto Haven

The sudden jump in Bitcoin might be coincidental but then again maybe not

Source; Bloomberg

The Central Bank of Russia has helped the ruble by making a conscious effort to stop making its situation worse. It suspended building up its foreign-currency reserves, which had involved selling rubles to buy about $180-200 million daily. But officials say they'll resume buying once the current bout of volatility subsides. And, by insisting they'll stick to their free-float policy, they're ruling out intervention.

The lack of a western military response in Syria, despite President Donald Trump's tweets, to a reported chemical weapons atrocity has also contributed to the ruble's part-recovery. Betting that all these powers will restrain their might is foolish.

There are lots of reasons to think the ruble can turn right back down again, and precious few to believe the rally will continue. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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    Marcus Ashworth in London at

    To contact the editor responsible for this story:
    Jennifer Ryan at

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