Since the Central Bank's policy of managing the ruble was abandoned at the beginning of 2011, the Russian economy has become far more insulated from fluctuations in external risk via a floating exchange rate policy. The weaker ruble should provide more fuel for oil exporters in times of weaker pricing and preserve their earnings and, hence, budget revenues. The floating currency should also help exporters increase their margins, as well as give domestic producers in the manufacturing, food processing and agricultural sectors an additional edge by making competitive imports more expensive. It is also good for balancing the budget. While a floating ruble provides a defensive mechanism against external risk, it does have its side effects. A weaker ruble is quite negative for capital inflows, while also driving up Russia's CPI, as it makes imports more expensive - on which Russia is quite dependent. It could imply some pressure on interest rates, while tighter ruble liquidity will weigh on the profitability of banks and real estate companies. However, a floating exchange rate will eventually make for a more balanced market, while a new equilibrium will be set for the Russian economy at a different ruble rate once the forex rate stabilizes. When this change is taking place, some money could be made.

Chris Weafer