The Bank of Russia intervened in the currency market on Friday, after the ruble fell to a fresh record low against the dollar in response to falling oil prices, market participants said.
The ruble dropped to 57.9860 against the dollar in early trade on the Moscow exchange, taking its year-to-date decline to more than 44%. The ruble soared to 55.94 in just two minutes around 0844 GMT, but then returned to levels of around 57.33.
“It looked like the central bank intervened in the market, causing a rapid move. The central bank is trying to put out the fire, but it is hard to withstand against the global oil trend with interventions,” said Dmitry Stadnik, chief foreign exchange trader at Rosbank, the Russian subsidiary of French bank Société Générale .
The Bank of Russia wasn’t immediately able to comment. The central bank officially discloses data on intervention volumes with a lag of two business days. Friday’s intervention details will be published on the central bank’s website on Tuesday.
The new rout in the ruble comes the day after the central bank showed no commitment to defend the currency’s exchange rate. The Bank of Russia raised its key rate by 100 basis points, to 10.5% from 9.5%, which was less than what analysts had expected. It also said the ruble was undervalued by up to 20% even at current oil prices. The rate rise and comments did little to buoy the Russian currency.
The latest drop in the ruble comes after Brent crude oil prices slid to $63.31 for the first time since September 2009.
Against the euro, the ruble touched a fresh low of 71 compared with levels of around 45 rubles per euro in December last year.
Recent currency interventions by the Bank of Russia have also failed to reverse the downward trend of the ruble. The central bank said Friday it sold $206 million on Wednesday, bringing the overall amount of December interventions, before Friday, to $5.48 billion.
The central bank let the ruble float freely in early November, an essential step toward inflation-targeting, but it said it reserves the right to intervene when necessary for financial stability.
The falling ruble potentially offers some relief to the country’s commodity-dependent and export-focused budget, but is seen as having an adverse impact on economic growth by fueling inflation, killing investment activity and denting household wealth.