The Russian ruble plunged further against dollar on Monday, dropping to a new low below 60 to the dollar before recovering slightly, even as a rally in oil prices promised some relief for Russia’s faltering economy. The ruble was changing hands at 61.25 against the dollar in late trading in Moscow, down more than 4% on the day, despite a rebound in Brent crude prices above $63 a barrel from an earlier low of $60.55.
The ruble’s rebound after touching a early low mirrors a recent pattern which traders suspects reflects intervention by Russia’s central bank to prop up the currency laid low by falling oil prices which are a major blow for Russia’s energy-export dependent economy.
The central bank may have sold some $700 million in the latest intervention, according to a person close to the Russian currency market. The central bank does not comment on its market intervention and reveals market activity with a two-day lag.
The ruble’s continued weakness has continued even though the Bank of Russia continues to tighten monetary policy, raising interest rates for the fifth time in quick succession last week. Though the latest 100 basis point hike was broadly in line with analysts’ expectations, some market players had expected more aggressive monetary tightening.
“The sell-off clearly accelerated in November and the ruble remains under severe selling pressure so far in December as well. In fact, December could prove the worst month for the ruble this year. In the meantime, the central bank is clearly reluctant to use interest rates against the speculators,” said Piotr Matys, rates strategist at Rabobank.