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RUBLE FALLS TO 54: RUSSIAN RECESSION LOOMING

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RUBLE FALLS TO 54: RUSSIAN RECESSION LOOMING

RUBLE FALLS TO 54: RUSSIAN RECESSION LOOMING

Dec 3 2014, 13.55 GMT

STOCK.com

USDRUB hit a new high as RUB sank to 54, after the Russian Economic Development Ministry revised its expectations of GDP.

The Ministry said it is expecting recession next year and gave up hopes of RUB strengthening any time soon.

On Tuesday evening, RUB was down 5% against USD at 54, after a 1% rise in the session a day earlier. RUB was 4.5% weaker against EUR at 66.9. The ruble was at historical lows against both currencies this morning. Currently, USDRUB is trading at 53.25 with a slight correction from 54.91 this morning; EURRUB is at 65.71 from 67.44 this morning.

On Tuesday there was no sign of intervention by the Russian Central Bank (RCB).  However, early today RCB revealed that it sold $700 million on Monday to support the ruble which was declining by as much as 6% at one point, the worst trading session since the 1998 financial crisis.

USDRUB MT4 CHART

ruble falling russian recession

EURRUB MT4 CHART

ruble falling russian recession

The ruble’s trading sessions of the past two days are the worst since the 1998 financial crisis, the currency being badly hit by the continuing fall of the oil prices after OPEC decided not to cut production at the end of last month.

The Russian Economic Development Ministry said that the 30% slump in oil prices and sanctions imposed by the West because of the crisis in Ukraine will cost Russian GDP a 0.8% decline in 2015, significantly revising the previous forecast of 1.2% growth.

The ministry also revised its forecast for average oil prices in 2015 from $100 to $80 per barrel and said that its expectation for the average ruble rate is 49 to the dollar. Oil is currently trading at $67.40

Vladimir Tikhomirov, an analyst at BKS, reported by The Moscow Times said that the crude prices may bottom out at $60 per barrel and the ruble's "fair" value at that price would then be around 55 rubles to one dollar.

OIL MT4 CHART

ruble falling russian recession

RUB has mirrored the oil price decline by almost a 30% fall against the dollar in the past three months, becoming one of the worst performers among more than 170 currencies tracked by Bloomberg.

Russia may enter its first recession since 2009 in the first quarter of 2015, according to Alexei Vedev, Deputy Economy Minister of Russia.

Vedev stated that inflation will end the year at 9% and slow to 7.5% at the end of 2015. The ruble’s devaluation will contribute 2.4% to consumer-price growth this year and 3.2% in 2015. Inflation in Russia has accelerated to 8.3% in October, the fastest since July 2011.

Russian retail sales, predicted at 0.6% growth next year, may instead show 3.8% decline, as expected by Vedev. Unemployment may rise to 6.4% in 2015, more than the forecast, and real wages will probably drop by 3.9%, he said.

The drop in Natural Gas prices are not helping RUB either as Russia relies on it for one of the main export revenue sources. Natural Gas fell to one-month lows yesterday. Currently, Natural Gas is trading at 3.839 and continuing downtrend since the last week of November, losing about 15% by now.  

NATURAL GAS MT4 CHART

ruble falling russian recession

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