MOSCOW: The Russian rouble suffered its biggest intraday fall of the year on Friday, tumbling to the lowest levels against the dollar and euro since April last year in the face of a foreign currency crunch in Moscow and the sale of Western businesses in Russia, according to Retuers.
The rouble nosedived to 113 to the dollar after President Vladimir Putin ordered the invasion of Ukraine in February 2022, though the Russian central bank and finance ministry stabilized the currency and it strengthened to 50 per dollar in July.
But since the West imposed a price cap on Russian oil — the lifeblood of the Russian economy — late last year the rouble has weakened from about 60 per dollar to more than 80 this week.
On Friday, the rouble skidded more than 2 percent against the US dollar to an intraday low of 83.50 and fell more than 2 percent against the euro an intraday low of 91.32 against .
Traders said the Russian currency was under pressure from a cocktail of problems including the sale of Western assets to domestic investors, which stoked demand for dollars, while lower oil prices in March cut export revenue.
The reported transfer of $1.21 billion to Shell for its stake in the Far East Sakhalin-2 gas project was cited by traders as a major factor as the daily trade in the rouble-dollar pair is only about $1 billion per day, down from more than $3 billion a day before the war.
“Buying for the Shell deal is the main reason,” a trader at one of Moscow’s biggest trading desks said on condition of anonymity.
The trader said the market expected the rouble to strengthen against the dollar in coming days and weeks as Russian companies buy roubles for tax payments and on the back of higher oil prices.
“We are expecting a sharp strengthening of the rouble, for example, by 2 percent or more,” the trader said. This was the worst week for the rouble against the dollar in 9 months.
Yuri Popov, an analyst at Sberbank, Russia’s biggest bank, said he expected the rouble to return to around 80 per dollar in coming weeks and to stabilize there.
Global Laggard
The rouble is the third-worst performer among global currencies so far this year, behind only the Egyptian pound and the Argentine peso, Reuters calculations show.
Traders said that the recent recovery in oil prices from last month’s declines is likely to support the currency in the coming weeks. Russia is the world’s second-largest oil exporter behind Saudi Arabia.
Oil prices fell in late March but have rebounded after banking turmoil in the West and an OPEC+ decision to cut output targets. Brent crude oil fell as low as $70 in late March but was trading around $85 on Thursday.
Russia’s main Urals blend sells at a discount to Brent.
“The Russian currency remains in fundamentally weak conditions,” said Vladimir Evstifeev, head of analysis at Bank Zenik. He said exporters were reluctant to swap their export revenues for roubles in the expectation that the dollar would strengthen while importers were buying foreign currency in the expectation of a bounce back in consumer confidence.
“The rate of weakening of the Russian currency is increasing, so it is likely that the authorities will get involved in the situation on the foreign exchange market and conduct a series of verbal interventions in support of the rouble.”
Amid a deficit of foreign currency, the central bank injected yuan liquidity via currency swaps this week.
The rouble fell 1.6 percent against the yuan to 11.99 .
Finance Minister Anton Siluanov talked up the rouble on Thursday when asked by state television about its fall.
“Prices for our energy have now gone up and this is a signal that there will be more foreign currency coming into the country,” he said. “Consequently, this will lead to the rouble rate having a tendency to strengthen.”
