The ruble gained 1.5 percent against the dollar Thursday, reaching 56.08, the best performance since December 2014. The Russian currency was buoyed by rising oil prices, but experts warn crude could be a false friend for the currency.
On Thursday, the ruble marked its eighth consecutive day of
gains, the best winning streak since mid-2013. The rise of the
ruble is supported by high oil but that is only part of the
newfound success, as gains this year have been not always been in
sync with oil.
— Holger Zschaepitz (@Schuldensuehner)
March 26, 2015
While Thursday’s success was attributed to unrest in Yemen and
to global energy Wednesday’s was not – a puzzle to analysts who
are trying to gauge the ruble’s reliance on crude.
“Ruble dynamics, to the contrary, are also still a function
of crude price trends – hence, recent ruble strength could be a
short-term phenomenon,” Vladimir Tikhomirov, chief economist
at Moscow-based BCS financial group, wrote in a March 25 note.
In 2014, the ruble closely mirrored every action of oil prices,
and the correlation was “excessively high,” between 90
and 100 percent, Vladimir Pantyushin, a senior strategist for
Sberbank CIB, told RT. Now, the link between the ruble and oil is
closer to 60-70 percent.
In the last six months of 2014 Brent crude prices, the benchmark
for more than half of the world’s oil, lost 50 percent in value,
and the ruble lost about 44 percent.
Oil has played a much less prominent role in the ruble’s exchange
rate in the first three months of 2015. Thursday’s success was also
attributed to the Russian tax season, which prompted companies to
buy up rubles in exchange for foreign currency.
“I would say oil is not a major factor if we look at the last
two months,” Pantyushin said. “We see an overall renewed
demand on the ruble coming from foreigners. Also, the tax payment
season pushed up the value of the currency.”
The trend is supported by Central Bank data, which shows that
Russians are selling the dollars and euros they stocked up on in
December. International monetary reserves increased for the first
time since November 2014. Last week, from March 13-20, reserves
rose $1.2 billion to $352.9 billion. In January, the same trend
dominated, with Russians selling off $6.7 billion in dollars and
euros at banks and exchanges.
“The strengthening trend started a week ago, despite weakness
in the crude oil price. This has surprised many Russia observers
and prompted speculation that the currency has finally managed to
decouple from the oil dynamic, a factor that has been driving the
ruble for many years,” the BCS note said.
The ruble’s rally has prompted Russia’s Ministry of Economy to
change their forecast predicting that the ruble will strengthen
to 40 rubles against the dollar if oil prices return to $100 per
barrel, the most positive of three scenarios ran. By 2018, the
ruble could crawl back to 50 rubles per 1 USD, as long as oil
prices grow by about 4 percent.
The forecasts are contingent on western sanctions being lifted.
“Overall, with Brent crude trading at $55/bbl, we believe the
current Rb/USD rate (Rb56.8 /$) is an overshoot. We expect that
once tax payments season ends in two days the currency will
correct to its fair value which, at this level of oil prices, in
our view is around RUB58-59/$ levels,” BCS said.
Sberbank CIB agrees that the 55-56 ruble-to-dollar range
witnessed in the past two days is a bit too optimistic, and in
the second quarter predicts the ruble to trade in the 60-62
VTB, Russia’s second-largest bank, said that reaching 55 rubles
is attainable, but not a given, as it depends on importer and
exporters demand for foreign currency versus rubles.
Last week, Finance Minister Anton Siluanov announced that the
worst was over for the Russian economy, and that it had entered a
period of stabilization. The breathing space is in thanks part to
more steady oil prices in 2015, as well as the West’s reluctance
to slap Moscow with more sanctions.
On December 16, the ruble spun into a freefall, with the dollar
hitting 80 and the dollar and crossing the 100 mark threshold
versus the euro. Since what was dubbed “Black
Tuesday,” the ruble has rebounded by more than
The collapse in oil prices, and the subsequent devaluation of the
ruble, has made Russia’s economic slowdown even more painful.