Economy

Rouble falls back in volatile trade after early surge

Russian currency is being hurt by falling oil prices and Western sanctions over Ukraine

The Russian currency is down some 40 per cent against the dollar this year.An employee uses a machine while counting Russian ruble banknotes at a private company’s office in Krasnoyarsk, Siberia. Photograph: Ilya Naymushin/Reuters

Tue Dec 30 2014 - 10:59

A recovery in the rouble ran out of steam on Tuesday as oil prices slid, wiping out early gains driven by modest foreign-currency sales on the final day of trading before the New Year holidays.

Earlier, the rouble was around 0.7 per cent weaker against the dollar at 58.76 roubles per dollar and 0.4 per cent weaker against the euro at 71.31. Within the first hour of trading, the rouble had surged to trade as much as 6 percent higher against the US currency, before gradually sliding back.

A forex trader at a Russian bank said the central bank was unlikely to have intervened on Tuesday, citing the small volumes that were moving the market. “Our market is very thin ahead of the New Year’s holidays.

With just $700 million in tomorrow trades, the rouble had moved by over 5 percent,” the trader said.

READ MORE

Analysts said the early surge was probably driven by forex sales by one of Russia’s state exporters, which were recently ordered to sell part of their overseas revenues to support the rouble.

A finance ministry official was unable to immediately say whether the ministry had sold foreign currency left over on its accounts on Tuesday. The Russian currency is down more than 40 percent against the dollar this year, hurt by plunging oil prices and Western sanctions imposed over Moscow’s role in Ukraine’s crisis.

They have limited Russian firms’ ability to borrow abroad and spurred demand for dollars. That slide has prompted heavy central bank interventions of more than $80 billion to defend the rouble and threatened to shatter the economic prosperity on which president Vladimir Putin’s popularity partly rests.

The central bank said on Tuesday that the finance ministry had sold $80 million in forex market interventions on December 26th, part of co-ordinated government efforts to defend the rouble.

The central bank releases its interventions data with a time lag and said it did not intervene itself on December 26th. Front-month Brent crude oil slumped on Tuesday to a new five-and-a-half year low on Tuesday at below $57 a barrel.

Reuters

LATEST STORIES