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22:00 Moscow time). The October futures for the American WTI fell in price by 5.6%, to $36.9 per barrel, reports The Bell.
September is already looking like it will be much worse for the ruble than the traditionally disastrous August. The currency has been pretty stable over the past month at RUB74.4 at both the start and end of August. It has also largely decoupled from the oil price after the government adopted the so-called budget ruble. While the last year has seen oil prices more than halved, the fall in the ruble has been much more modest and also partly buoyed by the inflow of foreign investment into Russian Ministry of Finance ruble-denominated OFZ treasury bills, which has off set much of the downward pressure from oil prices.
However, things have changed and foreign investors have been reducing positions in OFZs where their share has fallen from 34% to 29% in the last few months.
“The weakness in the ruble has also been mirrored by a steepening in Russia’s yield curve as long-term local currency government bond yields have drifted higher. This may partly reflect the drop in Russia’s short-term real interest rate since March, to less than 1%, which has reduced the attractiveness of Russian assets. But we think that the more likely factor is the increased threat of international sanctions,” writes Capital Economic’s Peach.
Now the ruble is under the cut off price when the budget rule kicks in of $42.4 the price of oil once again directly impacts the exchange rate.
At the same time the Central Bank of Russia (CBR) has been staying out of the FX market and keeping the money it received f rom the Ministry of Finance for its stake in Sberbank in reserves.
The Central Bank of Russia (CBR) on April 10 completed its deal to sell its 50% stake in retail banking giant Sberbank to the Ministry of Finance for a reported RUB2.14 trillion ($29.1bn). The CBR has been using this money as a slush fund to support the currency if needed, but as always has proven to be very conservative and largely left the ruble free to float.
The short-term outlook for oil prices remains relatively bleak, The Bell reports. The recovery in demand in Asia is slow, hobbled by the coronacrisis, an increase in supply from the OPEC + alliance, the end of the summer high season for gasoline consumption in the United States and, finally, a sell off on the American stock market, which started to fall at the end of last week.
Sanctions risks are have already been priced into today’s ruble trading, but since there are no specifics on this issue yet, the market remains nervous, says Natalia Orlova, chief economist at Alfa-Bank as cited by The Bell.
18 RUSSIA Country Report October 2020 www.intellinews.com
