Ruble Slides Most in Emerging Markets as Oil Slump Resumes

  • Aljba Alliance sees ruble trading in 75-85 corridor vs dollar
  • Russian currency rebounded at end of last week as oil jumped

The ruble fell the most among developing nations as the slump in oil resumed and concern mounted the world’s biggest energy exporter will struggle to emerge from recession.

Russia’s currency retreated 2.2 percent to 79.7730 as of 7:14 p.m. in Moscow, reversing gains of as much as 2.1 percent that made it the best performer among peers. Brent crude, which is used to price Russia’s main export blend, weakened 4.5 percent after climbing 2 percent.

Ruble fate follows Brent crude as Saudi Aramco investment plan pushes oil lower

Russia has been battered by crude’s tumble to the lowest level in 12 years, threatening budget revenue and pushing the currency to the weakest level on record last week. Oil declined after Saudi Aramco said it’s keeping up investments in energy projects and diesel consumption in China dropped for a fourth consecutive month, signaling an industrial slowdown.

“The correlation between oil and the ruble remains elevated,” said Artem Roschin, a currencies dealer at Aljba Alliance bank in Moscow. “The volatility of oil and hence the ruble is very high.”

The ruble’s 30-day correlation with oil was at 0.76 on Monday, near the highest since October, according to data compiled by Bloomberg. A value of 1 would mean the two are trading in lockstep. 

Roschin said he sees the ruble trading in a corridor of 75-85 per dollar and predicted that the central bank will keep its key rate unchanged when it meets on Friday.

“Nobody wants to push the ruble into the abyss,” he said.

All 30 forecasters in the Bloomberg rate survey predict no change to the central bank’s key rate of 11 percent on Jan. 29. Forward-rate agreements signal a 20 basis-point increase in the next three months.

“Keeping interest rates at a fairly high level should provide the ruble with some support, but it will not be sufficient to prevent selling pressure from increasing again if the rebound in oil proves unsustainable,” said Piotr Matys, a strategist for emerging-market currencies at Rabobank in London. Matys maintained his cautious view on the ruble, saying it’s "not out of the woods" yet.

Five-year government bonds fell, lifting the yield two basis points to 10.68 percent. The benchmark Micex stock index was little changed at 1,716.56. The Market Vectors Russia ETF had $5.34 million of outflows on Jan. 22.

Today’s declines come after hedge funds turned bullish on the currency for the first time in more than a month last week. One-month historical volatility on the ruble rose to 24.245 on Monday, the highest level since Nov. 2.

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