The ruble fell, extending its seventh straight weekly decline, as ING Groep NV and VTB Capital said the Russian currency’s retreat with oil has gone too far.
A 14 percent depreciation since the end of June, the most among 31 major currencies tracked by Bloomberg, has pushed the ruble’s relative strength index below 30 for the past week, the threshold signaling to some technical analysts that an asset is oversold. With the price of Brent crude trading near $50 a barrel, the exchange rate should be closer to 61 against the dollar, VTB Capital analysts Maxim Korovin and Tatiana Zueva said in an e-mailed note.
Dmitry Polevoy, the chief economist for Russia at ING Groep NV in Moscow, echoed the view, saying the ruble’s fair value is closer to 61-62, as much as 5 percent stronger than it is currently trading. While the world’s largest energy exporter’s state budget benefits from a weakening currency because it boosts the revenue it gets from dollar-denominated exports, the retreat also threatens to spur inflation.
“All we’re observing right now is just the ruble’s revaluation in the wake of lower oil price,” Polevoy said in e-mailed comments, predicting the currency would strengthen to 55 by year-end. “There’s no panic buying of foreign currency from either companies or households.”
Last year, Russian companies and individuals offloaded the local currency as sanctions over the conflict in Ukraine blocked access to global debt markets and oil’s plunge exacerbated the country’s economic slump.
The ruble, which has declined 44 percent in the past 12 months compared with a 53 percent drop in Brent crude, weakened 0.8 percent to 64.53 per dollar by 5:21 p.m. in Moscow. It’s fallen 4.4 percent this week.
Government bonds rose, sending the yield on five-year securities down one basis point to 11.10 percent. The Micex Index of stocks climbed 0.9 percent.
Only two banks took part in a regular central bank auction providing foreign currency to lenders using FX-denominated assets as collateral. The banks borrowed $443 million in total, Bank of Russia said in a statement on website.
The ruble is probably staying in oversold territory because large exporters prefer to sit out periods of volatility and not sell the dollars and euros they’ve generated, according to Sberbank CIB. Expectations for future price swings in the next three months are 22.2 percent, the highest among all currencies tracked by Bloomberg globally.
“Exporters are opting to hedge via USD/RUB forwards and swaps so as to be able to sell later at a better rate,” Iskander Abdullaev, analyst at Sberbank CIB, said in an e-mailed note.