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The Russian markets plunged on Tuesday before government authorities halted trading on the exchange an hour early; the Moscow Interbank Currency Exchange fell 17 percent, and the dollar-denominated Russian Trading System (RTS) fell 12 percent. The carnage built upon ongoing losses in the Russian economy that have now seen the RTS fall by nearly 60 percent since its mid-May highs. The Russian ruble has recently become the world’s worst-performing major currency.
Russian government officials insist that this is simply a passing storm that has nothing to do with the August invasion of Georgia. While obviously an overstatement, there is something to the claim. Western financial institutions — and investment houses specifically — currently are engaged in a flight to quality investments. Russia, despite its ongoing impressive energy and minerals exports, simply never made the list of the top tier of reliable assets.
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