The 16th of December will be remembered by investors across the globe, and Russia specifically, as “Black Tuesday;” a day when investors got a quick and unwelcome reminder of the 1998 crisis during which Russia was bankrupted. On Black Tuesday, the Ruble tumbled by 21.1% in less than a day and hit 78.51; Credit Default Swaps (CDS) for 5 years have priced in a 8.8% chance for a Russian bankruptcy. Black Tuesday was, simply put, an utter meltdown; investors were in a panic, Russians were running to the banks and the risk of a total collapse of the Russian economy hung in the air. Yet two weeks later, as some of the chaos from that Black Tuesday began to dissipate, some stability has emerged and with it the Ruble has regained some lost ground. The two questions which beg to be asked and answered; Is it the calm before the storm or perhaps a step toward stability? As we attempt to answer these questions we will also, hopefully, shed some light on the Ruble’s possible trajectory as a consequence.
What Ignited the Chaos?
Although it is still debatable as to what exactly was the last straw, there are clearly two very big contenders. The first was Rosneft, the Russian oil giant, was effectively bailed out by the Russian State through the tapping of the country’s emergency reserves. Continue reading "Is The Ruble Meltdown Over?"