Ruble Risks Betrayal at Home in Nation’s Rush for Dollars 

More Russians are beginning to keep their cash in dollars and euros as the ruble tumbles to records amid central bank efforts to maintain control over the pace of the decline.

The number of people with foreign-currency holdings rose in September from August, Bank of Russia said in its inflation report published Oct. 10. OAO Sberbank, Russia’s biggest lender, had its first drop in retail deposits since May last month, while the premium to swap rubles for dollars climbed to a record at the end of last week, data compiled by Bloomberg show.

“Once the mindset of a crisis sets in, it becomes a self-fulfilling prophecy,” Neil Shearing, an economist at Capital Economics Ltd. in London, said by phone on Oct. 10. “Residents start to anticipate further weakness in the ruble and shift out of rubles and into hard currency and that precipitates further weakness.”

Russians have been moving savings out of the ruble as President Vladimir Putin’s standoff with the U.S. and its allies worsened with the March annexation of Crimea. The ratio of deposits in foreign currencies rose to 19.4 percent in August from 17.4 percent in December, according to central bank data.

“The ruble is breaking through psychological levels,” Fedor Bizikov, a money manager at GHP Group in Moscow said by phone on Oct. 10.

Russians also moved their cash out of rubles when the 2008 financial crisis sent the currency sliding as oil prices tumbled below $40 a barrel.

Even with the past month’s drop, Brent averaged $106 a barrel in 2014. Ruble weakness is also boosting proceeds of state energy exporters since they earn in dollars, helping the government more than double its budget surplus in the first eight months.

 

Source: bloomberg- Ruble Risks Betrayal at Home in Nation’s Rush for Dollars

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