Russia’s central bank will be feeling vindicated in its decision to press ahead with a free float in the rouble, after a week in which the currency’s prolonged slide has apparently bottomed out.
The currency, which has lost more than a quarter of its value against the dollar since the start of the year, fluctuated wildly after the central bank announced this month that it was ending its daily interventions in foreign exchange markets. The policy – intended to smooth swings in the exchange rate – had ended up draining billions each week from foreign exchange reserves and became a target for speculators.
In the past week, however, the currency has stabilised, gaining around 5 per cent against the dollar. That recovery accelerated on Monday, when the rouble jumped 2 per cent to trade at Rbs44.8050 against the greenback.
The comeback was triggered by hints last week that Russia could cut back its supply of oil to the global market, and sustained by speculation that Opec nations could agree to cuts in oil production when they meet at the end of this week.
The rouble has also gained on the back of China’s unexpected cut in interest rates, which has boosted the currencies of emerging markets and commodity producers.
But Tom Levinson, currency strategist at Sberbank, said the currency’s relative stability also suggested the central bank was winning in its battle against speculators: shorting the currency is no longer a one-way bet.
Now, Russian exporters – who must convert overseas earnings into roubles at the end of each month to pay taxes – are rushing to lock in a favourable exchange rate before the rouble appreciates further. A survey released last week by a state-run agency also suggests that households, although worried about the exchange rate eroding their savings, are not rushing to convert them into dollars as some did earlier in the year.
However, analysts are split as to whether the Opec cartel will reach agreement on production cuts, and the rouble remains vulnerable to any change in the outlook for oil prices. Anton Siluanov, Russia’s finance minister, told a conference on Monday that while the country was losing around $40bn a year as a result of geopolitical sanctions over Ukraine, a 30 per cent fall in oil prices would result in losses of some $90bn to $100bn.
“At minimum, in order for the rouble not to decline, a commitment by Opec to stop oversupply and hold to its 30m bpd production target is probably required,” Mr Levinson said.
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