Ruble Stems December Slide as Rabobank Sees Downside Risk in Oil

  • RSI fell below 30 on Monday, signaling currency oversold
  • Rabobank says potential for ruble to revisit 2014 intraday low

Russia’s ruble stabilized near a record-low close as a technical indicator signaled this month’s drop had gone too far, while Rabobank warned of further declines if oil resumes declines.

The currency, which has weakened 6.7 percent against the dollar this month, appreciated less than 0.1 percent to 71.17 to the dollar as of 6:55 p.m. in Moscow, trimming an earlier advance of as much as 0.4 percent. Brent crude climbed for the first time in five days, rising 0.3 percent from an 11-year low to $36.45 per barrel.

“With Brent crude showing some signs of stabilization so far today, the selling pressure on the ruble may subside as well,” said Piotr Matys, a strategist for emerging-market currencies at Rabobank in London.

The exchange rate’s 14-day relative strength index has traded under 30 for two days, the threshold that signals to some analysts that an asset is oversold. Further strengthening will depend on the direction of oil, Matys said. Societe Generale SA said Monday the ruble is too strong relative to the price of oil, which has tumbled 18 percent in December, threatening to exert pressure on state revenue.

“Brent would have to produce a strong rebound at least above the important trend line at $40.66 to expect a sustainable pullback in the dollar-ruble pair, which at this stage seems unlikely," Matys said. Crude slumped on Monday amid speculation suppliers from the Middle East to the U.S. will exacerbate a global surplus as they fight for market share.

Oil Link

The selloff in oil has helped make the ruble the second-worst performer this month among 24 emerging-market peers tracked by Bloomberg. The currency may revisit an all-time low of 80.10 per dollar if oil continues falling and the exchange rate weakens past 71.803, according to Rabobank.

Five-year government bonds fell on Tuesday, pushing the yield three basis points higher to 10.19 percent. The Micex Index of shares climbed 0.4 percent.

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