Ruble Declines Most Within the Last 14 Weeks

Ruble, the major currency of Russia, has experienced the biggest decline in last 14 weeks as the fallout from the financial crisis of Europe has spurred the largest capital outflow from Russia within a year. Ruble has declined by 1% against the Dollar-Euro basket of the Central Bank and is at 35.6387 currently. This marks its biggest decline since 17th December. On the other hand, Ruble went down by 0.9% against USD and is currently at 31.6005 per USD. The yield on the benchmark bonds which are due by February, 2027 went down by 1 basis point and is currently at 7.33%. Brent oil went down by 1.5% and it is priced at $108.99 per barrel now. When it comes to the state budget income of Russia, the revenue from natural gas and crude comprise of around 50% of the same.

Due to increased crisis in the Euro region, net capital outflow is at $25.8 billion in the 1st quarter of this year. Anton Siluanov, the Finance Minister of Russia, stated that the Government may start to buy currency on the open market in the next half so that the Reserve Fund can be filled in.

According to the Analyst of ING Groep NV, Dmitry Polevoy, payment account data, MinFin’s statement on the market purchases of the foreign currency and the general increase in panic selling from foreign players – everything is happening together for Ruble.

Since the start of 2013, Ruble has declined by 3.3% against USD. When it comes to other currencies for countries such as Brazil, China and India, those have actually posted gains against USD in 2013. On 2nd April, selling kind of intensified as Bank Rossii decided to cut rates on the medium term financial tools by 25 basis points, thereby fueling bets that it may start an easing cycle soon.

Russia is the largest energy exporter in the world and it uses the Reserve Fund for helping finance the budget deficit. Incidentally, Reserve Fund is one of the two sovereign wealth funds of Russia. Central Bank manages these funds under the guidelines set by the Russian Finance Ministry.

Initially, the purchases were expected to begin again in 2014 or 2015. If the same is brought forward to 2nd half of 2013 that will prove that Ruble has an extra downside pressure at this point of time.