Ruble Extend Weekly Loss on Oil as Volatility Roils Currency

  • Russian currency's correlation with oil touches record high
  • Crude to remain `vital driver' for ruble, Tradition says

Russia’s ruble extended a weekly loss as oil declined amid concerns about a persistent supply glut hitting the price of the country’s main export.

The currency slid 0.5 percent against the dollar to 77.3570 as of 5:32 p.m. in Moscow, bringing declines for the past five days to 2.5 percent. Government bonds fell, pushing the yield on five-year notes up four basis points to 10.36 percent. Brent crude fell 1.1 percent to $34.09 a barrel after U.S. showed supplies rose above 500 million barrels through Jan. 29, the highest level since 1930.

Volatility in Russia’s currency has intensified as the price of oil, which along with natural gas provides more than half of the state budget revenue, fell as much as 27 percent this year amid a glut in supply. The ruble’s 120-day correlation with Brent crude rose to a record this week.

"Oil-market dynamics will continue to be a vital driver of directional momentum for the ruble and in this context the major risk event for today is the latest U.S. labor market report," analysts at brokerage Tradition said in an e-mailed note.

The ruble-oil correlation was 0.79 on Friday. A reading of one would mean the two assets are moving in lockstep. The oil market is seen as being oversupplied and prices of the commodity will remain “vulnerable to the downside,” said Giovanni Staunovo, an analyst at UBS Group AG in Zurich.

The Micex Index of stocks fell 0.5 percent to 1,779, heading for a 0.4 percent decline this week.

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