After months of remaining resilient in the face of heavy western sanctions, the Russian rouble has finally caved in, slumping past 68 per U.S. dollar to a more than seven-month low on Monday, courtesy of plunging crude prices as well as fears that sanctions on Russian oil could hit the country's export revenue, Reuters reports.
The rouble fell as much as 5.3% against the dollar at 68.02 in Monday’s intraday session, its lowest level since May 11. The Russian currency also lost 4.2% to the euro at 72.00, its weakest since May 6 and shed 5% versus the yuan to 9.74, its lowest since early July. Russian equities have also taken a hit, with the dollar-denominated RTS index down 5.4% to 982.8 points, a more than two-month low.
Relatively low oil prices as well as the $60-a-barrel price cap on Russian oil have pressured the rouble, "If the rouble holds above 65 (which could happen if exporters remain inactive in spite of the looming tax and dividend payments), we could see it move into the 67-70 range before long," SberCIB Investment Research has said in a note carried by Reuters.
Back in May, the rouble strengthened to levels not seen since 2018, rising 16% against the greenback and up nearly 150% since it bottomed out days after Russia’s invasion of Ukraine. That was a serious aberration because normally, currencies follow economies up or down.
However, measures by Moscow forced buying and limited selling and pushed the currency higher; in fact, so high that it started to weigh on Russia’s economy. The government countered by taking steps to weaken the currency, including lowering interest rates to 11% from 14% to make holding the currency less attractive and also eased a capital control that required companies to change 80% of their foreign-currency revenues to roubles.
Some short-term future support, however, is expected to help prop up the Russian currency when tax payments come due at the end of the month and exporters start to convert their revenue into roubles, Reuters cited analysts as saying.
By Alex Kimani for Oilprice.com
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