Russian ruble fell by more than 3%
The Russian ruble fell against the US dollar on December 11, 2015, after a free fall in crude prices globally. Higher inflation levels have been hurting the economy. This allowed less room for the Bank of Russia to ease its monetary policy. With Russia trying to bridge its budget deficit, investors expect that more depreciation in the ruble might be required to achieve the desired revenue levels. The fall in oil prices has been faster than the weakness in the ruble. This caused speculation that there’s more room for a fall in the value of the ruble.
The ruble has been under pressure in the past few weeks due to geopolitical tensions. Turkey shot down a Russian warplane. Also, OPEC’s (Organization of the Petroleum Exporting Countries) decision not to decrease the production levels also led to a fall in the crude prices. Crude prices have a high and positive correlation with the ruble. The US dollar-ruble pair is inversely related to the ruble’s strength. The pair ended higher by 3.3% at the end of the day on December 11, 2015. To learn more about the fall in the ruble after OPEC’s decision, read Russian Ruble Slumps as OPEC Maintains Production Supply.
Bank of Russia kept the rates at 11%
The Bank of Russia kept its benchmark interest rates at 11%. It kept the high inflation levels in mind. A rate cut allows easing in the monetary policy. The rate cut will stimulate economic growth. However, unless price pressures reduce, the central bank will have less room to reduce the rates. The upcoming FOMC (Federal Open Market Committee) meeting also weighed on the sentiment. A rate hike is expected to result in capital outflows. This will put more downward pressure on the ruble.
Impact on the market
ETFs were following a negative trajectory on December 11, 2015. The VanEck Vectors Russia ETF (RSX) provides exposure to companies that are publicly traded and domiciled in Russia. RSX fell by 2.7%. Also, the Direxion Daily Russia Bull 3X Shares ETF (RUSL) fell by 8.0%.
The negative trend was also evident in Russian ADRs (American depositary receipts). Mobile TeleSystems (MBT) fell by 4.6%. On the other hand, energy-related ADRs also fell. This included Canadian Natural Resources (CNQ). It fell by 3.2%. Meanwhile, Baytex Energy (BTE) traded negative by 6.1%.