The ruble fell to a three-month low as Danske Bank A/S said the central bank will probably keep buying dollars to offset the sliding price of oil, Russia’s main export.
The currency fell 1.3 percent to 57.621 per dollar by 5:57 p.m. in Moscow, dropping for a third day after Brent crude sank 2.1 percent to $55.37 a barrel, taking its three-day slump to 11 percent. A stronger ruble when oil is falling diminishes Russia’s local-currency revenue from exports. The ruble is down 4 percent this month, compared with a 13 percent drop in oil.
“The ruble’s decline is the natural response to deteriorating external conditions and as long as it’s not collapsing, the authorities should be fine with this weakening,” Vladimir Miklashevsky, a strategist at Danske in Helsinki, said in e-mailed comments. “The central bank may not even halt its dollar purchases, as it might be comfortable with relative ruble levels.”
The Bank of Russia started buying foreign currencies daily on May 13 to replenish its reserves, contributing to a 14 percent retreat since. With a barrel of Brent crude valued at 3,178 rubles today, or 10 percent below the 12-month average, the currency is “overbought” and may weaken further, according to PAO Rosbank analyst Yury Tulinov.
Russian government bonds also fell today, pushing yields on five-year notes up two basis points to a one-month high of 11.28 percent. The Micex Index of equities fell 0.9 percent in its third day of declines.
The nation’s crude and natural-gas industries account for about half of budget revenue and Brent is trading about 50 percent weaker than it was this time last year. The economy is set to shrink 3.5 percent this year in its first recession since 2009, according to forecasts compiled by Bloomberg.