Russia’s central bank intervened in the currency market for the first time since moving to a free float last month as a rout in oil sent the ruble tumbling to a record low for a fourth day.
The Bank of Russia sold US$700 million on Dec. 1, according to data on its Web site yesterday.
The ruble weakened as much as 6.6 percent to 53.95 per US dollar that day before closing 1.6 percent lower.
The currency traded 0.3 percent lower at 54.0245 by 10:14am in Moscow yesterday.
Oil’s 39 percent tumble since this year’s peak in June is cutting into Russia’s budget revenue, about half of which comes from oil and gas industries.
While abandoning most interventions on Nov. 5, the Bank of Russia reserved the right to sell foreign currency unannounced if it deems there is a threat to the nation’s financial stability.
The last time Russia sold foreign currency was on Nov. 7.
The central bank announced on Nov. 10 it was eliminating the remnants of a mechanism whereby it intervened each time the ruble broke out of a set trading band.
That policy, which enabled speculators to profit from taking short positions on the currency and betting on further drops, led the central bank to spend US$30 billion on interventions in October alone.
Brent crude rose 0.4 percent to US$70.84 a barrel yesterday, having slumped 12.7 percent last week as OPEC, the cartel that supplies about 40 percent of the world’s crude, left its oil-output target unchanged on Thursday last week.
Russia spent about US$90 billion of its foreign-currency reserves this year to help shore up the ruble amid the rout in oil and as sanctions over Ukraine created a domestic US dollar shortage by cutting off access of the nation’s companies to US and European debt markets.
On Tuesday, the Russian government acknowledged that the nation would be likely to fall into recession next year, after the Ministry of Economic Development revised its GDP forecast for next year from growth of 1.2 percent to a drop of 0.8 percent.
Russian households are expected to take a hit, with disposable income seen declining by 2.8 percent against the previously expected 0.4 percent growth.
However, Russian Minister of Finance Anton Siluanov attempted to talk up the ruble, saying that the new forecast for Russia’s economy is too gloomy.
The official told a Russian news agency that it is only “an early estimate and it is still being discussed.”
Siluanov said the ruble is oversold and its current exchange rate would correlate to an oil price of US$60 per barrel.
Additional reporting by AP
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