Russian ruble extends decline amid low oil prices

The Russian ruble extended declines after closing at a record low on Monday as data showed hedge funds turned bearish on the exchange rate for the first time since October. The ruble depreciated 0.6 per cent to 72.6360 per dollar in Moscow, its fourth day of losses and bringing this month's decline to 8.5 per cent, compared with an 18 per cent retreat in Brent crude.

Five-year government notes were unchanged to yield 10.02 per cent. Hedge funds and large speculators were net short835 futures contracts on the currency in the week ended December 22nd, wagering the ruble will decline in value, according to US Commodity Futures Trading Commission data. That compares with net long positions of 836 in the prior five trading days.

Russia has been getting less than 3,000 rubles for each barrel of oil it sells this month, compared with a one-year average of 3,240 rubles, according to Brent prices converted in the local currency.

"The ruble is catching up with the low price of oil," said Aram Kazaryan, a currency options trader at Bank FC Otkritie in Moscow, who expects the currency to weaken further before end of the year to about 74 against the dollar.

“Supportive factors, such as tax payments, have ended and liquidity is low because of the holidays.”

The price Russia gets for oil is straining budget revenue as the state struggles to contain its biggest budget deficit in five years. Brent crude,  used to price Russia’s main export blend, traded below $37 a barrel on Tuesday, poised to end 2015 with the lowest annual average price in 11 years.

The 46 percent plunge in the price of the commodity from this year's high on May 6th has piled pressure on president Vladimir Putin's government as it wrestles with the country's deepest recession since 2009. Russia's currency is poised for its third annual decline after oil sank and European governments kept sanctions in place as punishment for Russia's role in the Ukraine crisis. The Micex Index of shares added 1 per cent. Russian markets will be closed on December 31st and January 1st.

Bloomberg