Russian Ruble Weighed Down by Dropping Oil Price and Fitch Downgrade

Jan. 12 2015 — 11:07
A man walks out of a bank office, with an electronic board showing currency exchange rates seen above, in central Moscow.

The ruble fell sharply on Monday, dragged lower by a slide in oil prices and fears that ratings agency Standard & Poor's will downgrade Russia to junk in coming days.

The currency has been hit by plummeting prices of oil, Russia's main export, and Western sanctions imposed last year over the Kremlin's role in the Ukraine crisis.

Russian authorities spent $76 billion and 5.4 billion euros defending the currency in interventions in 2014, Central Bank data showed on Monday.

At 8 p.m. in Moscow, the ruble was down 2.4 percent against the dollar at 63 rubles and 3 percent weaker against the euro at 74.5.

The Russian currency tracked international oil benchmark Brent, which was down more 5 percent on Monday at $47.5 a barrel, falling below $48 for the first time since April 2009.

On Friday, Fitch downgraded Russia's foreign currency bonds to BBB-, one notch above investment grade, citing a significant deterioration in the country's economic outlook.

S&P said last month that it expected to complete a review of Russia, which it already rates at just one notch above junk with a negative outlook, by mid-January.

"We believe there is a high possibility that S&P will downgrade Russia's rating — if not now, then later this year as the country's macroeconomic indicators worsen," analysts at Rosbank said.

Russian bonds are already trading at "junk" levels. The yield on the 2030 eurobond was 7.2 percent on Monday, up around 25 basis points since Friday but below peaks of 8.3 percent in mid-December and 7.9 percent on Jan. 6.

Russian stock indexes were mixed, reflecting a recent pattern whereby a weaker ruble boosts the ruble-based MICEX index but weighs on the dollar-based RTS.

At the end of trading, the MICEX was down 0.1 percent at 1,513 points and the RTS down 3.3 percent at 756.6 points.

gateway.aspx.jpg
Reuters


'For the Homeland' – Soviet Election Posters
In honor of Russia elections on Sept. 18, we have compiled a selection of Soviet era campaign posters for your viewing pleasure.
August 1991: Muscovites Remember the Failed Coup in a New Exhibition
On the morning of Aug. 19, 1991, Muscovites woke to the sight of tanks in the street. On television, normal programming was replaced ...
August 1991: Muscovites Remember the Failed Coup in a New Exhibition
On the morning of Aug. 19, 1991, Muscovites woke to ...
Strong Women and Sexy Lenins: the Unforgettable Art of Russia’s Election Campaign
Three weeks ahead of the elections, the streets of Russian cities, towns and villages have become filled with ...