Ruble Slides After Russia Exporters Drove Best Week Since 1998
By Ksenia Galouchko and Vladimir Kuznetsov Dec 26, 2014 11:35 AM ET 172 Comments
The Crisis Is Just Beginning for Russia: Pomeranz
The ruble slid, eroding its biggest weekly rally in 16 years, in a signal that forcing Russian exporters to sell foreign currency may not be enough to shore up confidence as the economy verges on a recession.
The ruble weakened 2.5 percent to 53.90 a dollar by 7:29 p.m. in Moscow, ending a five-day rally. The currency has advanced 8.6 percent in its first weekly increase since the period ended Nov. 23, taking it out of step with oil prices that are trading near five-year lows and set for their fifth weekly retreat. Brent crude lost 0.3 percent to $60.07 a barrel today, bringing this month’s drop to 14 percent.
“As long as oil remains at these levels, the devaluation risk will persist,” Vadim Bit-Avragim, a money manager at Kapital Asset Management LLC in Moscow, said by e-mail. “The holiday of the rising ruble will end at the start of next year since there are no fundamental reasons for its strengthening.”
Today’s decline underscores the fragility of coordinated measures by Russia’s government and central bank that steered the ruble’s 49 percent rebound from a record-low 80.10 on Dec. 16. OAO Gazprom and four other state-controlled exporters were ordered to cut foreign-currency holdings by March 1 to levels no higher than they were on Oct. 1, while the central bank sought to make it easier for banks to access dollars and euros.
Highlighting the risks facing Russia as it contends with sanctions over the conflict in Ukraine and slumping oil, Standard & Poor’s said Dec. 23 there’s at least a 50 percent chance it will cut the sovereign’s credit rating to below investment grade within 90 days. The economy of the world’s largest energy exporter is set to shrink 1.4 percent next year, the average of 46 analyst estimates compiled by Bloomberg show.
Fundamental Range
The currency has fallen 39 percent this year, the most among 24 developing countries monitored by Bloomberg. That puts it on course for the worst year since 1998, when Russia defaulted on local debt. Brent, the oil grade traders use to price Russia’s main export blend, slumped 46 percent in 2014.
“We’re back to fundamentals,” Sergey Fishgoyt, the deputy head of foreign-exchange trading at Otkritie Bank in Moscow, said by e-mail. “The fundamental range for the ruble is now 58 to 68” to the dollar, he said.
The Micex Index (INDEXCF) of equities rose for a third day today, led by a 2.6 percent rally in OAO Lukoil. The yield on five-year government bonds declined 10 basis points to 15.32 percent, paring its rise since a surprise interest-rate decision on Dec. 16 to 100 basis points.
The Bank of Russia raised borrowing costs to 17 percent from 10.5 percent that day, triggering panic that sent the ruble plunging as much as 20 percent against the dollar.
more:
http://www.bloomberg.com/news/2014-12-25/ruble-rises-to-3-week-high-on-exporter-sales-central-bank-steps.html
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