The ruble fell to the lowest level since February as oil traded below $50 a barrel for a fourth day, stoking speculation the central bank will step in to support the currency.
The ruble weakened 0.9 percent to 64.012 against the dollar at 11:49 a.m. in Moscow after slipping 10 percent in July, the biggest drop among major global currencies. Crude oil, which tumbled into a bear market last month, gained 0.2 percent to $49.71 a barrel in London.
The Bank of Russia will restart one-year foreign-exchange repurchase operations that were halted June 1 to bolster the ruble, according to 14 of 17 economists surveyed by Bloomberg. The central bank paused last week a program of daily dollar purchases aimed at replenishing its reserves before lowering its key interest rate by 50 basis points on Friday.
“The ruble may fall to 70 against the dollar if Brent hits $45 a barrel,” Vladimir Vedeneev, the chief investment officer at Raiffeisen Capital Asset Management in Moscow, said by e-mail. “Perhaps it’s time for the central bank to begin taking measures to support the ruble since the speed of devaluation is very fast. One of the central bank’s tasks is reducing the volatility of the exchange rate.”
After oil hits the bottom, it will rebound to $55 a barrel and the ruble will strengthen to 55 to 60 against the dollar, Vedeneev said.
The ruble’s devaluation jeopardizes the economy’s recovery by contributing to inflation, which constrains the central bank’s ability to stimulate growth by cutting interest rates.
The central bank’s other possible support measures may include “targeted” currency interventions and a delay of further interest-rate cuts, BNP Paribas economist Eldar Vakhitov wrote in a report Aug. 3.
An indication that the drop may have gone too far is in the ruble’s 14-day relative strength index, which fell to 22.5 on Thursday, below the 30 level that signals to some analysts that losses are overdone.
The yield on Russian five-year notes climbed 13 basis points to 11.09 percent, the highest since July 28.
Russia’s currency is 5.2 percent weaker this year after climbing as much as 24 percent through May 13. It slumped 41 percent last year as collapsing oil prices exacerbated investor concern over sanctions imposed by the U.S. and European Union for Russia’s role in the Ukraine conflict.
The Micex Index of shares declined 0.3 percent, while the dollar-denominated RTS Index slid 1.6 percent. Gazprom PJSC dropped 1.5 percent and OAO Rosneft fell 0.6 percent.
Russian President Vladimir Putin spiked the idea of supporting Rosneft’s production projects with the National Wellbeing Fund money to save reserves amid the nation’s economic slowdown, Vedomosti reported on Thursday, citing unidentified government officials.