Report: Russia's ruble falls most in emerging markets on Iran comments

MOSCOW, Feb 24 (PRIME) -- The ruble weakened the most in emerging markets as Rabobank said the currency could fall further after Iran called a Russian-Saudi plan to freeze output "ridiculous," Bloomberg reported on Wednesday.

The currency declined 2.2% to 77 against the dollar by 12:11 p.m. as Brent crude retreated 2% to U.S. $32.61. The proposal between Russia and Saudi Arabia to cap output at January levels puts “unrealistic demands” on Iran, Oil Minister Bijan Namdar Zanganeh said Tuesday, according to the ministry’s news agency Shana.

Oil’s collapse to a 12-year low in 2016 amid a global glut pushed the ruble to a record low, put Russia’s economy on course for a second year of contraction and forced the government to consider budget cuts. If Brent falls below $32.68 a barrel, the ruble could revisit this month’s low of 80.64 per dollar, according to Rabobank.

“Comments from Iran’s Oil Minister fueled market doubts that other oil producers will respect the agreement to freeze oil output,” said Piotr Matys, a strategist for emerging-market currencies at Rabobank in London.

VOLATILITY PERSISTS

Three-month implied volatility, a measure of exchange-rate swings used to price options, is the highest in emerging markets at 26% after Argentina’s peso, suggesting investors anticipate ruble price swings to persist, data compiled by Bloomberg show.

While the Russian government discussed using 250 billion rubles ($3.2 billion) from the so-called “anti-crisis’’ fund to support the economy, the fund doesn’t have enough money, Kommersant newspaper reported today, citing a letter from Finance Minister Anton Siluanov to Prime Minister Dmitry Medvedev.

Five-year government bonds rose, pushing the yield down one basis point to 10.08%. The MICEX Index of shares fell 0.8% to 1,807. Russian markets were closed on Tuesday for a national holiday.

(77.1326 rubles – U.S. $1)

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