Ruble Trims Monthly Slump as Oil, Turkey Rift Highlight Risks

Updated on
  • Promsvyazbank expects currency to weaken to 68/$ by week-end
  • Putin on Saturday announced sanctions against Turkey

The ruble rose, trimming the biggest monthly decline since August, as escalating tensions with Turkey and signals that OPEC won’t reduce output this week underpinned the risk that losses will resume.

The currency, which has fallen 3.2 percent in November, climbed 0.6 percent to 66.068 per dollar by 6:15 p.m. in Moscow. PAO Promsvyazbank projects the ruble will weaken to 68 against by the end of the week as Iran said it expected no major decisions that would change the Organization of Petroleum Exporting Countries’ output target when the group gathers Dec. 4.

“December will be a tough month for the ruble," said Artem Roschin, a currencies dealer at Aljba Alliance bank in Moscow, who expects the exchange rate to drop toward 70 per dollar by year-end.

Russian assets came under selling pressure in November as Brent crude’s 8.1 percent retreat coincided with a pick up in tension after Turkey downed a Russian warplane in Syria last week. President Vladimir Putin on Saturday suspended visa-free travel to Turkey, halting tours and banning the hiring of the nation’s nationals, spurring concern that retaliatory measures will be unveiled. Russia is already subject to sanctions from the U.S. and European Union.

‘No Drivers’

Government bonds advanced, pushing the yield two basis points lower. The rate had fallen to a 13-month low of 9.71 percent on Nov. 20, before the warplane was downed, largely on speculation that Russia and the U.S. would fight together against Islamic State terrorists in Syria in the wake of the attacks in Paris this month.

The Micex Index decreased 0.4 percent on Monday, trimming an advance this month to 4.5 percent. Brent crude, which is used to price Russia’s main export blend, climbed 1.5 percent to $45.54 a barrel. Oil is set to average below $50 for a fourth month, the longest stretch since the global financial crisis, as a record supply glut showed no signs of ending amid a producers’ fight for market share.

“There are no visible growth drivers and oil will continue to remain key for the ruble," said Alexei Egorov, an analyst at Promsvyazbank in Moscow. “There’s not much demand for Russian assets because of geopolitical risks.”