Ruble Extends Biggest Weekly Slide in Two Months on Lower Brentby
Brent price in rubles trades near lowest level since 2011
Government revenues at risk as brent fall faster than ruble
The ruble extended its biggest weekly decline in more than two months as Brent crude, Russia’s key export revenue source, traded near an August low.
Russia’s currency is poised for a decline of 3.3 percent this week after closing yesterday at the lowest since Sept. 15. It traded 0.3 percent lower at 66.811 against the dollar at 6:59 p.m. in Moscow. The price of Brent in rubles tumbled to the lowest since February 2011 on Friday to 2,922, which compares with an average of 3,339 over the past 12 months.
“This is obviously a negative environment for the ruble," Tom Levinson, senior foreign-currency and rates analyst at Sberbank CIB in Moscow, said by e-mail. “The renewed slump in commodities is worrying because, in addition to long-standing excess supply, it comes about also because of concern about” weakening demand.
With the price of Brent in rubles trading below its 12-month average and at a 2011 low, the currency would need to weaken further to help Russia regain its export advantage. A weakened currency helps the government meet its fund-raising obligations by boosting budget revenue from exports in local currency terms. The economy of the world’s largest energy exporter contracted 4.1 percent last quarter from a year earlier, hit by a decline in commodity prices and sanctions by the U.S. and the European Union.
The correlation between the ruble and oil prices climbed to a record 0.88 on Oct. 6. A reading of 1 would mean the two are trading in lockstep. The reading fell to 0.7 on Thursday, still the most aligned among major oil-exporting currencies.
Oil dropped 0.8 percent to $43.71 a barrel, the lowest intraday since Aug. 27 and extending its slump in the past year to 44 percent as a global energy advisory group said stockpiles in developed nations have reached a record and U.S. crude supplies rose. Russia receives about half of its budget revenue from oil and natural gas sales.
Bonds fell for a second day, pushing the yield of five-year government bonds three basis points higher to 10.10 percent, the highest level since November 2.
The Micex Index dropped 0.7 percent, the sixth day of declines, the longest losing streak since Sept. 24. Russian equity funds lost $40.7 million in the week ended November 11, Sberbank said in an e-mailed note, citing EPFR Global data.