While we will not be trading the
Russian Ruble any time soon (it is regarded as an exotic by our brokers and
there are significant execution risks involved in taking and closing
positions), we nevertheless think it is of interest to record the fact that it
has recently been hitting a succession of all-time lows against an index
comprising of a euro – US dollar basket. The chart above shows it against the
US dollar only, but you get the idea (a rise in the USDRUB pair indicates a
falling ruble).
While a weaker currency is often
viewed by the relevant authorities as a good thing, in that it helps exports,
there are limits. And also a downside for those who need to import raw
materials and other goods. In light of this the Russian central bank has
started to purchase rubles on the Forex market in order to prop it up.
According to the Dow-Jones Newswire, it has so far spent in the region of 14.35
Billion from its US dollar reserves for this purpose during the current month
of October alone. This intervention does not seem to be having the desired
effect.
Russia’s international trade has, of
course, been impacted by sanctions imposed by the West over the situation in
Ukraine. Probably of more importance for the currency, however, is the dramatic
fall in the price of oil and other hard commodities. Russia is also a big
producer of Natural Gas, which is also suffering at present.
US
out of step on mortgage lending
A report
in the Wall Street Journal indicates that a number of regulatory agencies
in the US have agreed to relax mortgage lending rules. These are the Securities
and Exchange Commission (SEC), the Federal Reserve and the Dept. of Housing and
Urban Development. Interestingly, this comes at a time when many such agencies
around the world are moving in exactly the opposite direction. According to the
report, the new standards represent an effort to ensure that more mortgage
loans are made available.
In the UK and New Zealand so-called
macro-prudential policies, which limit the ability of banks to grant mortgages
by placing restrictions on loan-to-value ratios and other metrics, have already
been implemented. Similar moves are under discussion in Australia and Ireland. In
its monetary policy report issued on Wednesday, the Bank of Canada has dropped
its neutral stance on interest rates while noting that the housing market was
showing renewed vigour on the back of low rates. Together, these could be
interpreted to mean that it is considering a possible rate rise in order to
calm the housing market.
The WSJ report tells us that the US move
came in spite of the objection of two SEC commissioners, who warned that “…the rules
would do little to prevent a return to the kind of lax mortgage underwriting that
fuelled the financial crisis”.
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