The ruble plunged to a record for a third day, prompting speculation Russia’s central bank intervened to stem losses triggered by tumbling oil prices.
The currency weakened as much as 6.6 percent to 53.95, the most since at least 2003, before trading 3.6 percent lower at 51.8905 as of 6:22 p.m. in Moscow. The pattern of the recovery suggests the Bank of Russia may have been selling foreign currency, Sergey Romanchuk, the head of foreign exchange trading at AKB Metallinvestbank OAO, said in e-mailed comments.
While abandoning most interventions on Nov. 5, the Bank of Russia reserved the right to sell foreign currency unannounced if it deems there’s a threat to the nation’s financial stability. Russia’s economy is facing the worst slowdown since 2009 amid a 41 percent decline in crude from this year’s peak in June and international sanctions over Ukraine. Traders at OOO KB Aljba Alliance, OAO Alfa Bank and National Standard Bank also said the central bank may have intervened today.
“The ruble seems to be chasing the oil price,” Artem Roschin, a foreign-exchange dealer at Aljba Alliance in Moscow, said by phone. “As long as the oil price continues to fall, the ruble will weaken.”
The Bank of Russia’s press service didn’t immediately respond to an e-mailed request to comment on whether the central bank had intervened.
The last time Russia sold foreign currency was on Nov. 9, the day it announced it was eliminating the remnants of a mechanism whereby it intervened each time the ruble fell below a set trading band. That policy, which enabled speculators to profit from taking short positions on the currency and betting on further drops, led Russia to spend $30 billion on interventions in October alone.
Brent crude for January settlement fell as much as 3.7 percent to $67.53 a barrel before climbing 1.6 percent to $71.26 in London. OPEC, the cartel that supplies about 40 percent of the world’s crude, left its oil-output target unchanged on Nov. 27.
“Based on the style of trades, it could have been the central bank,” Metallinvestbank’s Romanchuk said by e-mail.
Igor Akinshin, a foreign-exchange trader at OAO Alfa Bank, and Andrey Mishko, a currency trader at National Standard Bank, also said the central bank may have intervened.
The dollar-denominated RTS stock index slid 2 percent, while the yield on 10-year government bonds jumped 14 basis points to 10.75 percent, a five-year high.
Russia stands to lose as much as $140 billion a year as a result of lower oil prices and U.S. and European sanctions, Finance Minister Anton Siluanov said last week, underlining the risks of a prolonged stalemate over Ukraine. Capital flight may reach $130 billion in 2014, the most since the global crisis in 2009, Siluanov said earlier last month.
At the same time, allowing the ruble to weaken boosts revenue from exports in local-currency terms, helping to offset Brent’s slide. Russia, which relies on oil and gas for about 50 percent of budget revenue, registered an 85 percent surge in its budget surplus in the first 10 months to 1.13 trillion rubles ($21 billion).
“A weaker currency has actually become an important part of the government’s strategy for dealing with lower oil prices, and in particular limiting the damage to the public finances,” Neil Shearing, an economist at Capital Economics Ltd. in London, said in an e-mailed note today.
While Russia’s economy is facing difficulties, it’s not in a critical condition, central bank First Deputy Governor Ksenia Yudaeva was cited as saying by the RIA Novosti news service today. The probability of a recession in the next 12 months has risen to 75 percent, the highest since the first such survey more than two years ago, according to a Bloomberg poll.
Three-month implied volatility on the ruble jumped 5.5 percentage points to 32.11 percent, a six-year high, according to data compiled by Bloomberg. The ruble’s relative strength index was 79.06 against the dollar, the highest since Nov. 6. A reading above 70 suggests to some investors the currency may be poised to gain.