The ruble weakened to a month low as turmoil in Greece and China sent oil, Russia’s biggest investment earner, below $60 a barrel, triggering speculation Russia’s central bank may curb its foreign-exchange purchases.
The currency fell 1 percent to 56.571 per dollar by 6:05 p.m. in Moscow. The last time the ruble slid that low on June 5, the Bank of Russia cut back its daily sales of the local currency, signaling to analysts the central bank was seeking to keep the exchange rate from falling too far. The ruble has fallen 2.3 percent in July, the second-most among emerging markets tracked by Bloomberg.
“It would not be surprising to see the central bank easing back on foreign-currency purchases, perhaps even today,” Tom Levinson, the chief strategist for foreign currency and interest rates at Sberbank CIB in Moscow, said by e-mail. “With oil prices currently falling sharply, the ruble looks vulnerable, and with contagion risks pertaining to Greece also elevated.”
While Russia’s direct economic links to Greece are limited, the country is vulnerable to outflows from the declining of risk appetite. Eastern European assets came under pressure on Monday after Greek voters rejected further austerity, raising the risk that Greece will exit the euro currency union. Brent crude slid as much as 3.4 percent also as China sought to restore investor confidence following a stock-market slump.
Russian government bonds fell, pushing yields on five-year notes up by 12 basis points to 11.27 percent, the most in more than two weeks. The Micex Index of equities dropped 0.6 percent in its second day of declines.
“We are in a risk-aversion mode, which means that demand for Russian assets amongst offshore names is likely to be weak as long as uncertainty over Greece prevails,” Piotr Matys, a London-based foreign-exchange strategist at Rabobank, said by e-mail.
The ruble is down 13 percent since the central bank started May 13 buying foreign currencies daily to replenish its reserves. The move helped stem the world’s biggest appreciation this year, which was cutting into government revenue from oil exports denominated in dollars and euros. When it falls too much, the ruble risks stoking inflation which in June fell to 15.3 percent, the slowest since January.
Shares of United Co. Rusal slid 4 percent as the aluminum producer was hit with a 12.2 percent European Union anti-dumping duty on aluminum household foil for six months.