- Correlation to oil closest in a week as Brent declines
- Russian government eyes economic measures to respond to Turkey
A decline in oil prices pulled the ruble lower as the currency’s link to the nation’s biggest export strengthened amid continued tension over the downing of a Russian war jet by Turkey.
The ruble weakened 0.5 percent to 65.827 against the dollar at 6:56 p.m. in Moscow while its correlation with oil reached the highest in more than a week. Brent crude retreated 1.5 percent to $45.47 a barrel, the first decline in seven days.
“The Russian market has switched its attention back to the oil price,” said Oleg Popov, a money manager at Moscow-based April Capital, which bought a unit of Allianz SE last year. “If tensions with Turkey escalate, that won’t be a matter of a few days."
Russian markets have been roiled by Turkey’s military action on Tuesday which injected a new layer of tension into the region and sapped optimism of warmer relations between Russia and the West to combat Islamic State in the wake of the Paris terror attacks. President Vladimir Putin is scheduled to meet French leader Francois Hollande in Moscow on Thursday for talks on how to fight terrorism.
The correlation between the ruble and oil rose to 0.7. The relationship climbed to a record 0.88 on Oct. 6. A reading of 1 would mean the two are trading in lockstep.
The government is developing economic measures to respond to Turkey’s action and the response may affect flights, trade and investment, while bilateral projects may be frozen or canceled, Russian Prime Minister Dmitry Medvedev said on Thursday.
The benchmark Micex Index fell 0.3 percent to 1,828.30. Stocks have recouped most of their losses suffered since the jet incident and are now just 2.2 percent under a seven-year high reached on Monday.
"Risks for the Russian market -- be it the price of oil or Syria -- remain very high,” Sergey Vakhrameev, a money manager at GL Financial, which oversees about $100 million in assets, said by phone from Moscow.