Russia's rouble fell sharply on Monday, setting a new 2015 low against the euro and approaching another against the dollar as it reacted to a plunge in Chinese markets that spooked investors world-wide and sent oil prices to new multi-year lows. There were losses too for Russian stocks and bonds, but there was little sign of panic dollar buying on Moscow's streets and analysts said the central bank was unlikely to intervene in the near future to prop up the currency.
The rouble is also suffering as Western sanctions imposed over the crisis in Ukraine make it hard for Russian companies to borrow abroad at a time when they need to refinance heavy overseas debts. "Given all the negativity around the rouble, I can see only a one-way move down," said Konstantin Kostrub from ING Eurasia. "If Brent falls to $40 per barrel, I can see the rouble hitting 75 per dollar".
At 1510 GMT, the rouble was 2.3 percent weaker against the dollar at 70.77 and had lost 4.1 percent to trade at 81.95 versus the euro. It fell less steeply against the dollar as the US currency also fell on global markets. Brent crude oil, a benchmark for Russia's main export, was trading down more than 4 percent on Monday at $43.60 per barrel after earlier falling below $43. Russia's dollar-denominated RTS index fell 4.5 percent, while the yield on the country's 2042 sovereign Eurobond rose by 20 basis points, reflecting weaker prices.
Economy Minister Alexei Ulyukayev, who was first deputy central bank head during the 2008/09 crisis, said on Monday oil could briefly fall to below $40 per barrel, effectively preparing the market for new falls in the rouble. Many analysts expect the central bank to refrain from major forex sales to save its hard currency for more critical situations, given that sanctions restricting access to Western capital are seen as staying in place for some time and oil prices are expected to remain low for the foreseeable future.
"Don't expect any active actions by the central bank to support the rouble. A weak rouble is becoming a new norm. For a long time," Maxim Buyev, the dean for economics at the European University of St Petersburg, wrote in an op-ed for the Vedomosti newspaper. On Saturday, Prime Minister Dmitry Medvedev said authorities would encourage exporters to sell hard currency more actively. Exporters already have to cover part of their hard currency revenues every month to meet rouble-denominated tax payments.
There were no long queues outside exchange kiosks in Moscow on Monday, unlike in 2008 when a collapse in oil prices prompted people to rush to switch their savings into hard currency or last December, when the rouble hit all-time lows.