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Rouble slumps to weakest vs dollar since May

Published 21/12/2022, 05:26 pm
© Reuters. FILE PHOTO: Woman holds Russian Rouble banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration
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By Alexander Marrow

MOSCOW (Reuters) -The rouble plunged to its weakest level since early May past 70 against the dollar on Wednesday, taking its monthly losses to almost 14% as fears over sanctions on Russian oil and gas spooked the market.

By 0939 GMT, the rouble was down 2.5% against the dollar at 70.60, after hitting 70.7550 earlier.

It had lost 2.4% to trade at 75.22 versus the euro, crossing the 75 threshold for the first time since late April. It had shed 2.1% against the yuan to 10.10, a near seven-month low.

The rouble has already lost more than 8% this week against the dollar and around 12% since a cap on Russian oil prices came into force. It has now lost top spot as the world's best-performing major currency this year to Brazil's real.

Armenia's dram and Georgia's lari are among the less liquid currencies to have strengthened sharply this year. Tens of thousands of Russians have fled to the likes of Armenia and Georgia since the conflict in Ukraine began.

The Russian currency has been supported by capital controls and an initial collapse in imports as a result of Western sanctions over Russia's actions in Ukraine this year.

FALLING REVENUES

The rouble has been catching up with the weakening of Russia's balance of payments, said Rachel Ziemba, founder of Ziemba Insights. "In recent months, Russian export revenues have fallen as it sharply reduced gas exports and the EU oil embargo is limiting oil revenues."

"Meanwhile imports have revived, meaning that instead of a gigantic import contraction-led balance of payments surplus it is coming closer to deficit," Ziemba added.

Russian oil exports fell by 11% for Dec. 1-20 compared to the previous month, after the European Union's embargo on Russian oil came into force, the Kommersant daily reported on Wednesday, citing unidentified sources familiar with the situation.

Andrei Kochetkov of Otkritie Research suggested that the withdrawal of funds by foreign companies selling their businesses in Russia could be putting pressure on the rouble.

Brent crude oil, a global benchmark for Russia's main export, was up 0.9% at $80.7 a barrel.

Russia's finance ministry is due to tap local debt markets once more on Wednesday, issuing three OFZ bonds as Moscow borrows heavily to help finance its military campaign in Ukraine.

Russian stocks were mixed. BCS World of Investments said the rouble continuing to plunge would likely also see the RTS index fall.

The dollar-denominated RTS index was down 1.7% to 951.1 points, earlier hitting a more than two-month low. The rouble-based MOEX Russian index was 0.6% higher at 2,131.8 points, rebounding from a near eight-week low hit in the previous session.

© Reuters. FILE PHOTO: Woman holds Russian Rouble banknotes in this illustration taken May 30, 2022. REUTERS/Dado Ruvic/Illustration

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