Reuters and Bloomberg Moscow
THE RUSSIAN rouble dropped to a new low of almost 58 (R11) to the dollar, continuing a slide that traders said led the central bank to intervene in the market on Friday after an interest rate hike failed to break the currency’s fall.
At 2.50pm, the rouble was around 1.7 percent weaker against the dollar at 57.36 and down 2.4 percent to trade at 71.55 versus the euro.
Dollar-denominated Russian stocks also dropped, following the weaker currency and lower oil prices.
The rouble has lost more than 40 percent against the dollar since the beginning of the year, hurt by a slide in oil prices and risk aversion to Russian assets fuelled by Russia’s stand-off with the West over the crisis in Ukraine.
Russia’s central bank raised its main lending rate by one percentage point on Thursday, but failed to stop the rouble’s slide or lift the gloom over the economy.
Some traders said the bank had intervened on Friday as the rouble approached 58 to the dollar. It hit a high of 57.98 on the Moscow exchange.
“This, without doubt, was the central bank. I believe it went out to defend the 58-rouble mark and sold some $700 million (R8.2 billion) in a short time,” Aleksei Vorobyov, the head of forex operations at Vozrozhdenie bank, said.
Russia’s central bank said on Friday it had conducted 11.18 billion roubles worth of foreign exchange market interventions on Wednesday. That followed $348m in interventions on Tuesday and about $4.5bn in interventions last week, despite the bank floating the rouble last month.
Traders said that the rouble could also be hurt by expected dollar buying by Russia’s top oil producer, Rosneft, which sold 625 billion roubles worth of bonds on Thursday.
Comments from the central bank that it would keep limiting rouble liquidity via its foreign-exchange swap operations in a bid to stabilise the currency market did little to support the rouble. The price of oil, which together with sales of natural gas accounts for half of Russia’s federal budget revenues, has reached a new five-and-a-half year low due to persistent concerns over a global supply glut and a bearish outlook for demand.
US sanctions
In a further blow to Russia, US Congress has voted for tougher sanctions to punish Russia for its intervention in Ukraine, moving beyond steps the White House and the EU have been willing to take while giving President Barack Obama leeway in applying most of the provisions.
The Ukraine Freedom Support Act of 2014, which passed the Senate and House unanimously, authorises – but does not require – providing lethal assistance to Ukraine’s military as well as sweeping sanctions on Russia’s energy sector.
The measure mandates sanctions against Rosoboronexport, the state agency that promotes Russia’s defence exports and arms trade. It also would require sanctions on Gazprom, the world’s largest extractor of natural gas, if the state-controlled company withholds supplies to other European nations.
The resolution was softened from its original text, which would have required sanctions on the Russian energy industry and made Ukraine, Moldova and Georgia “major non-Nato (North Atlantic Treaty Organisation) allies,” facilitating arms transfers and greater military co-operation with the former Soviet republics.