Ruble Slump Enters Fourth Day

The Russian ruble extended declines after closing at a record low on Monday as data showed hedge funds turned bearish on the exchange rate for the first time since October.

The ruble depreciated 0.6 percent to 72.687 per dollar by 12:16 p.m. in Moscow, its fourth day of losses and bringing this month’s decline to 8.5 percent, compared with an 18 percent retreat in Brent crude. Five-year government notes were unchanged to yield 10.02 percent.

Hedge funds and large speculators were net short 835 futures contracts on the currency in the week ended Dec. 22, wagering the ruble will decline in value, according to U.S. Commodity Futures Trading Commission data. That compares with net long positions of 836 in the prior five trading days. Russia has been getting less than 3,000 rubles for each barrel of oil it sells this month, compared with a one-year average of 3,240 rubles, according to Brent prices converted in the local currency.

“The ruble is catching up with the low price of oil,” said Aram Kazaryan, a currency options trader at Bank FC Otkritie in Moscow, who expects the currency to weaken further before end of the year to about 74 against the dollar. “Supportive factors, such as tax payments, have ended and liquidity is low because of the holidays.”

Recession Pressures

The price Russia gets for oil is straining budget revenue as the state struggles to contain its biggest budget deficit in five years. Brent crude, used to price Russia’s main export blend, traded below $37 a barrel on Tuesday, poised to end 2015 with the lowest annual average price in 11 years. The 46 percent plunge in the price of the commodity from this year’s high on May 6 has piled pressure on President Vladimir Putin’s government as it wrestles with the country’s deepest recession since 2009.

Russia’s currency is set for its third annual decline after oil sank and European governments kept sanctions in place as punishment for Russia’s role in the Ukraine crisis.

The Micex Index of shares added 0.6 percent, extending its 25 percent advance this year.
Russian markets will be closed on Dec. 31 and Jan. 1. Markets are open in Russia from Jan. 4 to Jan. 6 and closed again on Jan. 7 and 8 for Orthodox Christmas.


Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell