Rouble suffers worst fall since 1998 crisis

The rouble nosedived on Monday, suffering its worst intraday fall since Russia’s 1998 crisis amid renewed fears over the impact of tumbling oil prices on the country’s economy.

The currency weakened to a record 53.86 per dollar – a move of 6.5 per cent – before staging a rally, according to Reuters data. By 3.30pm GMT, the currency was trading at Rbs51.83 against the US currency, a 2.8 per cent weakening in the exchange rate on the day.


The plummeting currency raises the pressure on the central bank to resume market intervention, from which it had abstained since floating the rouble in early November.

On November 10, the Bank of Russia abolished the band in which the rouble had so far traded and ended the daily interventions through which it had been propping up the exchange rate. But the central bank said it was reserving the right to intervene if it saw a risk to financial stability.

Speaking to Russian news agencies on Monday, Ksenia Yudaeva, the Russian central bank’s deputy chairwoman, said the regulator had begun working off a forecast oil price of $60 a barrel.

“It appears increasingly likely that there will be a long-term decline in oil prices,” Ms Yudaeva said, citing the decision by Opec last week to keep production volumes at current levels.

Ms Yudaeva said there was currently enough currency liquidity in the market to handle the shockwaves of the rouble’s fall. She said the central bank had raised its benchmark interest rate to 9.5 per cent in November, in a bid to encourage Russian households to keep their savings rouble-denominated bank deposits, rather than running to convert all their roubles into euros or dollars.

“It’s necessary to explain to people that the yield they get on their deposits at the moment will guarantee a high degree of safety for their savings with regards to inflation. They should think twice before rushing out, losing the yield on their deposits, taking on currency risks and losing money on their currency conversions,” Ms Yudaeva said.

In contrast to previous economic crises, Russian banks have yet to report a wave of depositors taking money out of their rouble deposits. However, there are already signs that Russian lenders are taking precautionary measures to prevent a run on the banks.

On Monday Russian newspaper Izvestia reported that some of Russia’s banks had started limiting sales of dollars and euros to $10,000 or €10,000 per client. Rosbank, Société Générale’s Russian subsidiary, now restricts clients from buying more than $1,000 at a time, while Raifeissenbank had set a limit of Rbs100,000 (now less than $2,000), Izvestia said after calling the customer service departments of those banks and 28 other top Russian lenders.

Analysts said that while the bank’s move had helped curb speculation against the rouble, the plummeting oil price wiped out much of the stabilising effect achieved through the currency float.

Brent crude was down to $68.40 a barrel on Monday morning, continuing its slide after the Opec group of oil producing nations decided against a cut in production which could have stabilised prices.

Tom Levinson, a strategist at Sberbank CIB in Moscow, said the rouble’s precipitous fall on Monday – when oil prices had opened lower but swiftly recovered – suggested the currency had become detached from the correlation with oil seen over the past couple of weeks.

The plunge in Brent crude leaves many other emerging market currencies under acute strain. Nigeria’s central bank, which was forced into an 8 per cent devaluation of the naira last week, is struggling to keep the currency within its new target trading band. The naira was down 2.5 per cent at N183 to the dollar on Monday trading.

Iranian official media cited the country’s economy minister warning against “frenzied behaviour” after Iranians rushed to buy foreign currency over the weekend. Venezuela’s exchange rate controls – in which the black market value of the dollar is vastly higher than any of the official rates set in a three-tiered system – will come under further pressure.

The currencies of oil exporters with floating exchange rates have also fallen, with the Malaysian ringgit down around 1.5 per cent against the dollar.

Revenues from oil and gas extraction accounted for more than half of Russia’s budget revenues last year, and oil and gas make up almost 70 per cent of the country’s exports. Since Russian resources exporters earn revenues in dollars but most of their costs, as well as fiscal spending, are in roubles, the Russian currency’s slide cushions some of the oil price drop’s impact.


However, the weakening currency is strangling investment in an economy highly dependent on imports for everything except resources. It has also made it vastly more expensive for Russian banks and corporates to service their foreign debt.

According to the central bank, banks and other companies have $614bn in external debt; $31bn is due for redemption in December, and another $98bn before the end of 2015.

Following the Opec decision last week, the Russian finance ministry said the budget needed to be revised to reflect the reality of lower oil prices. Economy minister Alexei Ulyukaev said at the weekend his ministry was also working on lowering its oil price and exchange rate forecasts.

The plunge in Brent crude leaves many other emerging market currencies under acute strain. Nigeria’s central bank, which was forced into an 8 per cent devaluation of the naira last week, is struggling to keep the currency within its new target trading band.

Iranian official media also cited the country’s economy minister warning against “frenzied behaviour” after Iranians rushed to buy foreign currency over the weekend. Venezuela’s exchange rate controls – in which the black market value of the dollar is vastly higher than any of the official rates set in a three-tiered system – will come under further pressure.

The currencies of oil exporters with floating exchange rates have also fallen, with the Malaysian ringgit down around 2.5 per cent against the dollar since the Opec meeting, the Mexican peso down 1.5 per cent and the Colombian peso down 2.4 per cent.




Fonte: FT