MOSCOW: The rouble tumbled past 60 for the first time yesterday as traders tested Russia’s willingness to defend the currency amid an oil slump that’s pushing the economy toward recession.
The rouble weakened as much as 5 percent to 61.25 per dollar, pushing the Bank of Russia to sell foreign exchange to stem the slide, according to BCS Financial Group and MDM Bank. Three-month implied volatility for the currency, which traded 4.2 percent weaker at 60.7205 by 5:34 pm in Moscow, climbed to a six-year high. The yield on 10-year government bonds rose 11 basis points to 13.11 percent, the most since 2009.
Traders are pressing the Bank of Russia to buy more rouble to limit a selloff that has wiped out 19 percent of the currency’s value this month. Oil’s slide toward $60 a barrel in London and sanctions over the conflict in Ukraine are undermining confidence in Russian assets as evidence mounts that the economy is entering a recession. Industrial output fell the most in more than a year in November, data showed.
“To a large extent it’s a foreign outflow, triggered by a reconsideration of Russia’s long-term prospects,” Dmitry Dudkin, the head of fixed-income research at Uralsib Financial Corp. in Moscow, said by email. “People start pricing a long period of low oil prices. And in these circumstances, Russia doesn’t look like a place where one should invest money, even without sanctions.”
The economy of the world’s largest energy exporter is set to shrink 0.8 percent in 2015, the government said this month, in what would be its first recession since 2009. The rouble has retreated 46 percent this year, the most among global currencies after Ukraine’s hryvnia.
Bonds and stocks are also underperforming developing- country peers this month. While the dollar-denominated RTS Index has declined 24 percent since November 30, rouble bonds slid 21 percent, according to the Bloomberg Emerging Market Local Sovereign Index.
Russia is set to register $125bn of capital outflows in 2014, the most since 2008, according to Economy Ministry forecasts and central-bank data.
Policymakers failed to stop the rouble’s depreciation this month with more than $6bn of interventions and a 100 basis-point interest-rate increase.
WP-BLOOMBERG
