Ruble slides past 80 and hits all-time low against dollar

The Russian ruble weakened to an all-time low in the high 79-80 range to the dollar Wednesday, with some anticipating an even further decline amid cheap crude oil prices and Western sanctions over Ukraine. The ruble has lost over half its value against the greenback in the last two years, dropping past the previous low from December 2014.

Russia relies on oil and gas exports for much of its government revenue. But benchmark North Sea Brent is under $30 a barrel for the first time in 12 years.

In fact, Russia actually needs the ruble to weaken to increase the amount of rubles coming in from lower oil prices. “Russia needs crude oil to be at $82 a barrel to balance its national budget,” said Toru Nishihama of the Dai-ichi Life Research Institute. “There’s been more concern over a growing budget deficit.”

The ruble’s long-term decline was triggered by the descent in crude prices that began in the summer of 2014. Tensions with the U.S. and Europe over the Crimean Peninsula also led investors to unload the Russian currency.

In a bid to defend the ruble, Russia’s central bank unpegged it from a dual currency basket in November 2014 and adopted a floating exchange rate regime. But market players continued to sell the currency, leading the bank to raise its key interest rate by 6.5 points overnight to 17% that December. The move helped stop the ruble’s fall at about 78 to the dollar.

“There’s not as much pressure on Russian authorities to enact policies compared with 2014, when cheap crude prices coincided with the Ukraine crisis,” said Osamu Takashima of Citigroup Global Markets Japan.

The previous ruble low was set on December 16, 2014, when the Russian currency was trading at 80.10 rubles to the dollar. As of this writing we are now at 80.50 rubles to the dollar.

“The market will be generally driven by global economic sentiment, which does not exactly look hopeful at the moment,” Alfa Bank, the largest private commercial bank in Russia. said in a note to clients on Wednesday.

According to experts polled by Bloomberg, the Russian Central Bank could resume currency interventions if the ruble exchange rate continues to fall against the dollar. According to a survey of 15 experts, the Russian Central Bank could enter the currency market with the Russian currency falling to 90 rubles against the dollar. At the same time, two experts believe that interventions could begin even at the rate of 80 rubles per dollar, which is where we stand today.

The ruble trades from 08:00-18:00 CET on most brokers platforms and is the official trading hours on Moscow Exchange, who sees volumes in ruble rise when the market gets extra volatile.

Stay tuned…


Read Also: