Forgot the flight insurance. Photo source: Reuters.
And indeed the exchange rate of rubles per dollar fell sharply on the news yesterday of Prigozhin’s plane crash, from about 95 rubles per dollar to 94. Since then, it has recovered to 94.5: The plane crash was a big deal, but not that big.
And curiously, most of the movement in the
ruble occurred several hours before the plane crash was widely known in
the US or Europe. Prigozhin's plane left Moscow about noon UTC Wednesday and crashed shortly thereafter. The ruble began climbing about 12 hours later and slowed down by 3am UTC, about an hour before Reuters reported the crash. Hmm…
But although the ruble gained in dollars, it lost in tenge. It fell from 4.9129 tenge at 12:30 UTC to
4.8286 at 3am August 24. (The table below gives the equivalent times in Washington
and Almaty.) The ruble strengthened to 4.8806 tenge at about 6am August
25. But it remained below the value that prevailed before news of the plane crash.
|
|
UTC |
EDT |
Almaty time |
|
Ruble rises in $ |
12:30, August 24 |
8:30pm, August 23 |
6:30am, August
24 |
|
Ruble rise ends |
3:00am, August
24 |
11pm, August 23 |
9am, August 24 |
|
Most recent
report |
6am, August 25 |
2am, August 25 |
Noon, August 25 |
This is intriguing. It is not likely to be due to intervention
by the National Bank of Kazakhstan in the foreign exchange market. The Bank does not release statistics of interventions
until after a month, but this is probably not the sort of event that would
trigger its interference. In fact, the
Bank reports no purchases or sales in the domestic forex market since December
2022 at least, in its commitment since 2015 to keeping its mitts off the tenge exchange rates. So the reason for the weakening of the ruble vis-à-vis the tenge
must lie elsewhere.
One possibility, if I may speculate, is that the consolidation
of Putin’s position makes more possible that Putin’s War will continue. Another
draft may be in the works. Especially with the loss of Prigozhin’s Wagner
group, which had recruited prisoners, such a draft may call up young, educated Russians.
Anticipating this, they would flee to Kazakhstan, selling rubles in exchange for
tenge. The ruble would weaken in terms of tenge.
These curious shifts come in the wake of the desperate
attempt August 21 by the central bank of Russia to shore up the ruble by
jacking up the interest rate by 3.5 percentage points to 12%. Western sanctions and softening oil prices had
undermined the Russian currency. The higher interest rates in Russia did indeed boost
demand for the ruble, so the exchange rate of tenge per ruble rose a few days
ago.
Now the ruble is falling in tenge. This might be in
part an adjustment to the over-reaction to Moscow’s hike of its interest rate,
which the National Bank of Kazakhstan, with its eye on the long run, sensibly refused
to follow. In fact, the National Bank has cut the base rate by a quarter-point
to 16.5%, effective Monday, August 28, as inflation in Kazakhstan keeps falling.
The tenge is already weakening noticeably in dollars, from 461.81 Wednesday to
464.84 at 11:19am Friday UTC. Zowie! One reason is that an investor will sell tenge and buy other currencies as their relative rate of return rises due to the fall in Kazakhstani interest rates. – Leon Taylor, Baltimore tayloralmaty@gmail.com
Notes
For useful comments, I thank Dmitriy Belyanin.
References
Google Finance. The exchange rate of rubles to dollar. https://g.co/finance/USD-RUB?window=5D
Google Finance.
The exchange rate of tenge to ruble.
https://g.co/finance/RUB-KZT?window=5D
Google Finance. The exchange rate of tenge to dollar. https://g.co/kgs/NGii4J
National Bank of Kazakhstan. Data on interventions of the NBK | National Bank of Kazakhstan
Reuters. Wagner
boss Yevgeny Prigozhin listed in Russian plane crash with no survivors |
Reuters
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