Report: Ruble retreats for second day as oil slides below $30

MOSCOW, Jan 26 (PRIME) -- Russia’s ruble sank for a second day as crude oil fell below U.S. $30 per barrel, prompting Bank of America to suggest that interest rates could rise if the price of the country’s main export earner weakens further, Bloomberg reported on Tuesday.

The ruble lost 2.2% to 81.8160 as of 11:46 a.m. in Moscow, taking its two-day decline to 4.6% and almost erasing its strongest 1-day rally in more than a year on Friday. The retreat once again made the Russian currency the worst performer among 24 emerging-market currencies tracked by Bloomberg.

Russia relies on oil and natural gas for almost half of its budget revenue and the decline in crude prices combined with sanctions over the conflict in Ukraine have driven the economy into the worst recession since 2009. Should crude prices fall further and the ruble weaken beyond 90 per dollar, policy makers may be forced to raise rates, Vladimir Osakovskiy, an economist at Bank of America, said at a briefing in Moscow on Tuesday.

“The ruble is crashing on oil again, but it’s no way oversold,” said Dmitry Dudkin, the head of research at Uralsib Capital in Moscow. “With the current crude price the ruble could have been at 90-100 per dollar, this would be much more comfortable for the budget.”

A weaker ruble brings in more local currency per barrel of oil, which helps the government meet its budget revenue targets. Russia’s central bank will keep rates on hold at 11%, according to all 36 economists surveyed by Bloomberg. Oil prices sank before U.S. government data forecast to show crude stockpiles expanded for a third week.

“In any event the central bank’s trajectory on rates will be less flexible than the market had originally supposed,” said Evgeny Koshelev, an analyst at Rosbank in Moscow. “The rate could stay unchanged until the middle or the end of the second quarter.”

End