Biden's prospects cast pall of gloom over Russian rouble
November 23, 2020

Biden’s prospects cast pall of gloom over Russian rouble

LONDON/NEW YORK (Reuters) – It appears that the fortunes of the rouble are tethered to the White House contest and the prospect of Democratic candidate Joe Biden winning has weighed on the currency for months.

It had its heyday when Donald Trump won the 2016 election with the help of the president’s congenial ties with Russian counterpart Vladimir Putin.

The rouble has been shielded from some of the wild swings suffered by emerging market peers from Turkey to South Africa by low debt levels as well as prudent monetary and fiscal policies.

With polls showing Biden having a lead, the focus is now on the new administration’s relations with global powers, including chances of greater friction between Moscow and Washington.

That risk along with concerns about the spread of the pandemic in the country and the lower oil prices has caused the rouble to tumble 9% against the dollar over the past three months. This makes it one of the emerging markets’ worst-performing currencies. It is now trading at around 77 against the dollar.

But the weakness of the rouble has come as an advantage to exporters and the budget. It might also affect the ability of the central bank to continue easing monetary policy in a bid to bolster the pandemic-hit economy.

“If there wasn’t geopolitical risk in the currency, we’d probably be closer to 70, or even lower,” said Blaise Antin, head of emerging market sovereign research at TCW. “That’s reflective of the investor concern that’s out there and that concern isn’t going to go away on Nov. 4.

“Even if Biden wins, there’s going to be considerable uncertainty about what his policy mix will be.”

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