The ruble may fall when Russia’s financial markets open on Jan. 11 after a seven-day holiday as companies and banks demand foreign currency to repay more than $80 billion of debt this year, according to Societe Generale SA.
The ruble may slump 10 percent this month against the central bank’s target basket of dollars and euros, Societe Generale analysts said. The currency lost 20 percent against the dollar and 11 percent versus the euro between August and the end of last year as the Russian economy weakened because of the falling price of oil, its main export earner. Russian banks will trade for the first time this year on Jan. 11, when the central bank will resume its management of the exchange rate.
Most eastern European currencies weakened against the dollar this year, with the Hungarian forint and Romanian leu falling more than 5 percent because of slower growth and the halt in gas supplies triggered by the price dispute between Russia and Ukraine. Danske Bank A/S in Copenhagen sees a 15 percent drop in the ruble by year end.
“All the problems we left behind at the end of last year are still there, and more,” said Murat Toprak, senior currency strategist at Societe Generale in London.
Russian banks need to refinance $65 billion of debt due in less than 12 months and companies have $38 billion coming due, of which 80 percent is denominated in a foreign currency, Societe Generale data show.
While Russia’s holiday has limited the market, the ruble has traded. The currency rose 2.26 percent against the basket and 5.48 percent against the euro today after Russia and the European Union agreed to monitor gas transit through Ukraine in a step toward resolving the dispute that cut shipments to Europe.
“You cannot count this ruble rally because of the limited trading in the foreign exchange markets,” said Lars Rasmussen, an analyst at Danske Bank in Copenhagen. “The trend is weaker for the ruble and we will see further depreciation.”
Russia’s central bank was forced to allow the currency to depreciate as an internationally condemned war with Georgia, a more than 70 percent decline in oil and the worst global financial crisis since the Great Depression triggered more than $200 billion of investor withdrawals since August, according to BNP Paribas SA.
Bank Rossii manages the ruble against a target basket of 55 percent dollars and 45 percent euros to protect exporters. The bank weakened the ruble against the basket through 12 separate devaluations since Nov. 11. Russia used about $160 billion, or 27 percent, of its foreign-currency reserves since early August as Prime Minister Vladimir Putin sought to support the ruble to avoid sudden swings.
Oil has tumbled 73 percent from a record high $147.27 a barrel on July 11. Urals crude, Russia’s main export blend, was at $43.86 a barrel today, 37 percent less than the $70 average price that Finance Minister Alexei Kudrin says is needed to balance the budget this year.
The decline in crude is pushing Russia, the world’s biggest energy exporter, toward its first recession since 1998, when plunging oil revenue forced the government to default on $40 billion of debt.
Industrial output slumped the most since 1998 in November, while unemployment surged to 6.6 percent and wage arrears almost doubled.
“It’s a new year, but with the same old issues,” said Luis Costa, a debt strategist at Commerzbank AG in London. The currency will slide on “refinancing pressure” as banks and companies seek dollars and euros to repay their debt, he said.
Russia is deploying about $200 billion in emergency funds to inject liquidity into frozen credit markets and help companies and banks refinance their debts. The government approved a list of 295 companies for priority access to state loans on Dec. 25.
“Emerging-market corporates are set to witness the most dramatic decline in access to international market funding for all but the upper-crust non-government issuers,” emerging-market analysts at RBC Capital Markets led by Nick Chamie in Toronto, wrote in a research note yesterday.
The dollar-denominated Russian Depositary Index (RDXUSD), a measure of global depositary receipts trading in London, climbed 6.6 percent this year, as of 4 p.m. in London. American depositary receipts of OAO Gazprom, Russia’s largest natural gas producer, increased 12 percent in the period.
The MSCI Emerging Markets Index of equities from 23 developing countries advanced 0.7 percent this year.
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