The ruble tumbled to a record for a second day, prompting speculation Russia's central bank intervened to slow the rout as weaker oil prices worsen the outlook for an economy verging on recession. Government bonds slid.
The currency lost as much as 2.7 percent, to 57.9860, leading the central bank to buy rubles, according to OAO Bank Otkritie and BCS Financial Group. It traded down 1.7 percent at 57.4205 by 4:54 p.m. in Moscow as Brent oil's drop below US$63 a barrel outweighed yesterday's 100 basis point interest-rate increase. Ten-year government bond yields jumped 48 basis points to 12.94 percent.
Russia's currency is on course for its worst year since the nation's 1998 default after getting battered as sanctions over the conflict in Ukraine blocked companies from Western debt markets and oil dropped into a bear market. Five interest-rate increases by the central bank failed to alter the ruble's course, while choking economic growth as inflation accelerates to a three-year high.
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"Oil is a priority for investors in Russian assets, and it's quickly approaching $60; such speed of declines is very troubling," Anvar Gilyazitdinov, who manages $10 million at Rye, Man & Gor in Moscow, said by phone. "Falling oil and the risk of recession at the start of next year are pressuring the ruble."
Russian bonds are already having their worst month since February 2009 as investors dump the nation's assets at the fastest pace in six years. The sovereign notes lost 5.96 percent since Nov. 30, according to Bank of America Merrill Lynch indexes. The cost of insuring Russian government debt rose for a 15th day, the longest streak on record.
Currency Interventions
The central bank sold at least $600 million to support the ruble today, Luis Saenz, the head of equity sales and trading in London for Moscow-based BCS Financial Group, said in an e-mailed note. The intervention was at least $1 billion in size, according to Sergey Fishgoyt, the deputy head of foreign-exchange at OAO Bank Otkritie.
The government said for the first time last week that the economy will probably contract 0.8 percent in 2015, the worst performance since it shrank 7.8 percent in 2009. The oil and natural gas industries make up about 50 percent of Russia's budget revenue. Brent crude tumbled as much as 1.9 percent, to $62.50 today, the lowest since July 2009.
Russia's dollar-denominated RTS Index of stocks slid 2.4 percent to a five-year low.
OAO Sberbank fell for a second day on the Micex as JPMorgan Chase & Co. cut the net-income forecast for Russia's largest bank by 7 percent for 2014 and 29 percent for 2015, citing a deteriorating economic environment, the ruble's decline, and risks from Ukraine exposure.
Three-month implied volatility on the ruble against the dollar was 37.5 percent today, the most among global currencies monitored by Bloomberg. The contract reflecting traders' expectations for future currency swings increased after the central bank pushed forward a free float last month, abandoning an intervention policy that led it to drain more than $80 billion from its foreign-currency reserves this year.
Policy makers resumed interventions this month, spending at least $5.5 billion.
"All Russian assets are following oil, and oil is falling to $60 a barrel," Dmitriy Gritskevich, an analyst at OAO Promsvyazbank in Moscow, said in e-mailed comments.
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