- Correlation between Brent and ruble close to October high
- Russia investors watching Iran's capacity to deliver
The ruble slumped the most among emerging-market peers as investors sold the currency of the world’s biggest energy exporter amid concern Iranian crude deliveries will extend an oil-market rout.
Russia relies on the oil and natural gas industries for almost half its budget revenue and collapsing crude prices have weakened the ruble 6.9 percent versus the dollar this year, the most among developing nations after South Africa’s rand. The Russian currency retreated 1.9 percent to 79.1120 against the dollar by 4:25 p.m. in Moscow, its lowest intraday level since Dec. 16, 2014, when falling energy prices and the conflict in Ukraine drove the ruble to a record low.
The lifting of international sanctions on Iran has helped raise the correlation between Brent and the ruble toward its strongest since October. Crude sank below $28 per barrel on Monday, extending declines and trading at a 12-year low. Trading will be more volatile today because of public holidays in the U.S., according to Danske Bank A/S.
While Iran’s return to the market is “broadly priced in,” a “big question is how much Iran is able to deliver in the mid-run," Vladimir Miklashevsky, strategist at Danske, said in e-mailed comments. “With the U.S. closed today the ruble market will stay rather thin and volatile.”
Russia’s budget for 2016 is based on $50-per-barrel oil and President Vladimir Putin’s government is weighing austerity measures to counter shrinking revenue. It will take at least 12 to 18 months for a balance between supply and demand on the oil market to return, RIA Novosti reported on Sunday, citing Energy Minister Alexander Novak.
Government bonds dropped for a third day, lifting the yield on five-year notes 3 basis points to 10.80 percent. The benchmark Micex Index of Russian stocks rose 0.5 percent, climbing for the first time in four days.
If crude stabilizes, there are “some reasons to be constructive" on the ruble, Deutsche Bank AG analysts said. They cited a pause in monetary easing, better growth rates and slowing inflation.