International Investing

The new leader is going to make some tough political choices. Very likely this will cause the currency to strengthen. Bloomberg has the details:

Merrill Lynch & Co., Goldman Sachs Group Inc. and Deutsche Bank AG predict gains of as much as 4 percent in the next six months. They say pressure will mount on the central bank to let the ruble appreciate to stem inflation even if it risks damping profits of oil and energy exporters, which according to Merrill Lynch fund more than half of the federal budget.

The last time Bank Rossii, which must submit proposed changes in monetary policy to the government, allowed the ruble to strengthen was in August, when the inflation rate was 8.5 percent. It’s now 13.3 percent, five times the average of the Group of Seven industrialized nations. Two interest-rate increases this year failed to restrain consumer prices, and Russia “isn’t ruling out” letting the ruble gain, Bank Rossii Deputy Chairman Alexei Ulyukayev said April 24.

“Ruble appreciation will continue to be a key anti- inflation tool given the limited domestic monetary instruments the central bank has at its disposal,” said Ramin Toloui, a senior vice president at Newport Beach, California-based Pacific Investment Management Co., which manages more than $800 billion. “That favors continued ruble appreciation.”