The ruble slid the most in emerging markets as the biggest drop in China’s yuan in two decades drove down oil prices and sparked concern Russia’s exports to its largest trading partner will be curtailed.
The currency weakened 2.1 percent to 64.1810 by 4:26 p.m. in Moscow, its sharpest decline on a closing basis since Aug. 3. Russia’s five-year ruble bonds pared gains, leaving the yield down two basis points at 11.07 percent.
China’s decision to devalue its currency makes raw-material imports more expensive for the world’s biggest consumer of metals and energy. That’s a concern for Russia, where government officials are calling for a so-called pivot east that would see China take a bigger share of the nation’s exports in response to European Union and U.S. sanctions over Ukraine. Germany is currently the biggest destination for the goods Russia sends overseas, while most of the country’s imports come from China.
“Russia is in the midst of trying to reduce its dependency on the EU and move more to China for export revenues,” Simon Quijano-Evans, the head of emerging-market research at Commerzbank AG in London, said in an e-mailed note, commenting on the impact of the yuan decision. He reiterated his “cautious position” on Russia’s currency and debt.
Crude oil slumped 2.4 percent in London trading to $49.21 a barrel, extending its drop this quarter to 23 percent. Oil and natural gas contribute about 50 percent to Russia’s budget revenue.
“The only thing that really impacts the market is the price of oil,” Vladimir Vedeneev, chief investment officer at Raiffeisen Capital in Moscow, said in e-mailed comments.
Russia may eventually benefit from the yuan devaluation if the move succeeds in reviving Chinese growth rates, according to MDM Bank PJSC foreign-currency and derivatives trader Aram Kazaryan.
“If they succeed, the oil price may go higher, pushing the ruble in turn,” Kazaryan said by e-mail.
The Micex Index of stocks traded up 0.1 percent after climbing as much as 1.1 percent earlier.
The 50-member-gauge trades at 5.8 times projected 12-month earnings compared with 11.2 times for the MSCI Emerging Market Index. The Micex has climbed 22 percent since the start of the year, compared with a 8.2 percent drop for the developing-nation measure.