USD/RUB bounces back amid threat of further sanctions and falling oil prices

on Nov 14, 2014
Updated: Apr 9, 2020
Listen, Friday, November 14: The USD/RUB has seen little change so far in today’s trading session after yesterday it managed to recover losses incurred earlier in the week. The ongoing rout of oil prices, however, along with fears of new Western sanctions over Ukraine have weighed on the Russian currency.

The pair was up 0.1 percent at 46.72 as of 06:38 GMT, and was trading over 14 percent above its 50-day simple moving average. It posted its biggest intraweek gain in the seven days ended 7 November after touching a record high of 48.65 last Friday. USD/RUB poised for biggest weekly gain since 2009 Yields on Russian 10-year government bonds, known as OFZs, increased to the highest since 2009.

On Monday the rubble rose as much as four percent versus its US counterpart following news that the Central Bank of Russia (CBR) had allowed the currency to float after it spent billions of dollars trying to defend it.
Russian foreign exchange reserves declined from $510 billion (£325.7 billion) in January to $421.4 billion last week. The CBR blew $29 billion on interventions last month and raised the interest rate to 9.5 percent to prevent outflows.

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On Monday central bank Governor Elvira Nabiullina said that ruble liquidity provided by the CBR was partly being used “for games on the currency markets,” according to an interview with Rossiya 24. She said policy makers would temporarily limit ruble liquidity.
The Russian economy has taken a hit as the price of oil, which provides about half of the country’s budget revenue along with natural gas, has continued its rout and fell below $80 dollars a barrel earlier this week. Oil price: Brent falls below $80 for the first time since 2010 It is estimated that every $10 drop in the price of oil costs Russia $28 billion in receipts.

EU and US officials met in Brussels to discuss imposing further sanctions on Russia amid rising tensions between Ukrainian troops and pro-Kremlin rebels in the eastern parts of the country. The Russian currency has also been under pressure this year as Western imposed sanctions precipitated an estimated $75 billion capital exodus in the first half of 2014 alone.
Artem Roschin, a foreign-exchange dealer at OOO KB Aljba Alliance in Moscow, was quoted by Bloomberg as saying:
“”The falling oil price is an even more important factor for the ruble than sanctions””
“The falling oil price is an even more important factor for the ruble than sanctions […] Oil is trying to breach $80 and may continue its slide. The US and EU are debating the scale of new sanctions, this creates quite an intrigue.”

JPMorgan Chase & Co. wrote in a recent note that it has cut the earnings outlook for the Russian oil and gas sector by 15 percent after lowering its forecast for Brent to a range of $82 to $88 a barrel in 2015 and 2016.
First Deputy Chairman of the CBR Ksenia Yudaeva yesterday said that the central bank would try to convince export-oriented companies to convert their revenues into rubles in an attempt to stabilize the battered currency.
Speaking in front of parliament, Yudaeva said that the central bank “will discuss with exporters that in fact they are not winning from attempts to play with export revenue conversion,” as reported by Russian news agency Interfax.
According to Yudaeva, the “risks of the ruble’s depreciation—despite that it clearly allows to have a budget surplus even with lower oil prices—are a bad recipe for the economy”.


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