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Screenshot of a breaking news alert e-mail from Q2 2017
The leading credit rating agency has injected more volatility into an already volatile situation.
Global credit rating agency Standard & Poor’s (or S&P for short) has downgraded its ratings of Russian foreign debt to BBB-, just one notch above ‘junk’ status, keeping its outlook negative. S&P backed its decision by continued capital outflows from Russia, as well as the country’s financial account deficit.
So what does this mean for the markets?
Well, in short, more negativity. On a usually-quiet Friday the markets have reacted by pushing the Ruble lower against the dollar another 0.3%, after the Ruble had already dropped 8% so far in 2014. And Russian stock exchanges were off between 1.0-1.5%.
But what’s bad for the Russian government and Russia’s stock market might not be bad for the Russian forex sector – which seems to like volatility. In what’s already been a somber first half of the year for Russia’s capital markets, we’ve seen healthy growth in FX trading volume metrics at places like Alpari Russia, the leading retail FX broker in the country, and at the Moscow Exchange.
Lowered credit ratings usually brings with it more currency volatility, and that could be good for business for forex brokers in the country.
To see a copy of S&P’s Russia downgrade click here.