Danske Bank Says Steeper Oil Drop Spells More Ruble LossesKsenia Galouchko
The ruble’s steepest slide in 16 years will worsen unless oil prices recover from $70 a barrel, according to the Russian currency’s second-best forecaster.
The ruble will weaken another 3.7 percent to 55 per dollar within two to four weeks if Brent crude stays around that level, Vladimir Miklashevsky, a strategist at Danske Bank A/S, said by e-mail yesterday. If oil sinks to $60 a barrel, the exchange rate risks sliding to 62, he said.
The selloff in Russian assets took a turn for the worse as oil, which along with gas contributes about 50 percent to the nation’s budget revenue, plunged further into a bear market following OPEC’s decision last week to keep output unchanged. The Bank of Russia probably spent about $500 million to defend the ruble yesterday after it slid as much as 5.6 percent to a record 53.95 per dollar, Miklashevsky said. That would be its first intervention since moving to a free float last month.
“We do not exclude that the central bank decided to brandish its arms by intervening a bit on the record-fast ruble decline,” said Miklashevsky, the second most accurate forecaster for the ruble-dollar in the past 12 months. “To go heavily against the cheapening oil would be total madness. Thus, the possible intervention was a tiny one.”
Oil is increasing pressure on Russian assets already suffering as U.S. and European sanctions over the conflict in Ukraine push the nation’s $2 trillion economy toward recession and cut off access of companies to western debt markets.
The ruble retreated 3.3 percent to 52.9705 by 3:21 p.m. in Moscow. Brent decreased 1.4 percent to $71.56 per barrel, after rallying 3.4 percent yesterday. Russia’s currency has retreated 15 percent in the past six days, the most since 1998, according to data compiled by Bloomberg.
That drop has taken the currency’s 14-day relative strength index to 81.4, its most-oversold level in almost a month. A reading above 70 suggests to some traders that a security is poised to reverse.
While abandoning most interventions on Nov. 5, the Bank of Russia reserved the right to sell foreign currency unannounced if it deems there’s a threat to the nation’s financial stability. The central bank’s press service didn’t immediately respond to written questions on whether it stepped into the shore up the ruble yesterday.
Options trading show a 58.4 percent probability that the currency will weaken another 10 percent by March 2, according to data compiled by Bloomberg.