Ruble remains stable – euro drops to lowest level in 20 years

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Lower interest rates in the eurozone and the war in Ukraine caused the euro to drop to $1.01 – the last time there was such an exchange rate was twenty years ago. Meanwhile, the Russian ruble remains on track for success.

The parity between the euro and the dollar has actually been reached. On Friday morning, the price hit a low of $1.0077, but shortly thereafter stabilized again at just above $1.01.

US pushes interest rates forward
Compared to the previous year, the exchange rate of the euro has collapsed by about 14 percent. There are two reasons for this: On the one hand, the US Federal Reserve reacted relatively quickly to high inflation and has now raised key interest rates to between 1.5 and 1.75 percent, more than at any time since 1994.

European Central Bank too hesitant?
This makes the dollar and denominated bonds more attractive to investors and led to price increases. In the eurozone, the first interest rate step will only be taken in two weeks and the key rate is currently still at zero.

The war in Europe is also playing a role as the economy – and with it the currency – is weakening across the continent. Although the US also had to withdraw its economic forecasts, at least energy is much cheaper there than here.

Ruble at highest point in seven years
The outlook for the Russian ruble is currently somewhat more positive and has even been at its highest level in seven years for some time. Although the Russian national currency fell slightly at the beginning of the week, the ruble is still significantly more expensive than before the outbreak of war in February – one euro cost 64 rubles or 63 US dollars on Friday.

However, as the strong ruble has a corresponding effect on export-oriented sectors, Russian Economy Minister Maxim Reschetnikov recently stated that countermeasures are being considered here.

Russia insolvent
In fact, however, the strong ruble is not automatically an indication of the recovery of the Russian economy. While benefiting from high oil and natural gas prices, the currency’s exchange rate was recently supported by measures taken by the Kremlin and private individuals were not allowed to withdraw foreign currency.

In addition, Russia has recently failed to repay interest on foreign currency bonds, with the rating agency Moody’s even declaring Russia insolvent. Although the country has sufficient resources, Western sanctions prevent the payments from reaching Russian creditors.

Source: Krone

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