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 The same factors have driven the Russian currency lower since the
middle of last week, leading traders to position for further
weakness, and by 5 a.m. EDT, the rouble was 0.82 percent weaker
against the dollar at 38.71and had lost 0.91 percent to 50.10 versus
the euro.
That left the currency 0.86 percent weaker at 43.83 against the
dollar-euro basket the central bank uses to gauge the ruble's
nominal exchange rate.
It fell below 38 rubles per dollar for the first time ever on
Monday. By Tuesday morning it had already breached 38.50 and
appeared to be fast approaching 39, falling as low as 38.93 before
recovering slightly.
"The trigger for the ruble's weakening was the U.S. sanctions at the
end of last week. The market took the sanctions as an additional
negative, coming on top of falling oil prices," said Vladimir
Pantyushin, a forex strategist at Sberbank CIB.
"Since then there's a self-perpetuating dynamic: the market has
positioned for the rouble to weaken and there's nothing supporting
the currency."
Alexei Mikheev, an analyst at VTB 24 bank's investment department,
said in a note to clients: "You could characterize the behavior of
the market on the dollar-rouble pair as panicky and irrational."
He said that Western sanctions over Ukraine, possible Russian
counter-sanctions, the shaky ceasefire in eastern Ukraine and low
oil prices were all factors behind the ruble's plunge, although none
were new on Tuesday.
On Friday the European Union and the United States imposed new
sanctions against Russia, designed largely to limit major companies'
access to western finance.
The U.S. sanctions were harsher than expected, Pantyushin said,
hitting major private companies as well as state ones.
Private oil companies Lukoil and Surgutneftegaz are among the
companies impacted by technology import restrictions. The United
States has also not shied away from targeting state-owned gas giant
Gazprom, which is notably absent from EU sanctions.
Restrictions on international financing come at a time when dollars
are in high demand globally, and particularly in Russia where many
large companies need them to repay foreign debts in coming weeks.
In a report, Morgan Stanley calculated that debt redemptions by
Russian companies and banks will almost double to around $47 billion
in the fourth quarter from $26 billion in the third.
"With relatively stable conditions on external markets such a
collapse in the rouble can only be explained by real demand for
foreign currency from companies and speculative pressure," ING
economist Dmitry Polevoy said in a note.
"The threat of sanctions and the closure of access to foreign
currency liquidity from the West is feeding demand."
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He said that the market appeared determined to push the rouble down
to 44.40 versus the basket, the level at which the central bank
carries out unlimited supportive interventions.
He added that "despite the panic" ING was not changing its
medium-term forecasts. The bank sees the rouble at 37.49 against the
dollar and 41 against the basket a year from now.
The central bank has been progressively scaling back its forex
market interventions as it prepares to allow the rouble to float
freely from the start of next year.
While the policy changes have been well advertised and do not
explain current negative market sentiment, they mean shifts in
market mood effect the rouble more quickly than in the past.
Also weighing on sentiment, investors worldwide are eyeing a
possible hawkish shift in the U.S. Federal Reserve's policy stance
at its two-day meeting starting on Tuesday.
Analysts said that monthly tax payments, which require Russian
exporters to convert foreign currency into rubles, would support the
rouble later in the month.
Russian share indexes were mixed on Tuesday, with the
dollar-denominated RTS index, which is negatively impacted by a
weaker rouble, down 0.1 percent. The rouble-based MICEX index was
0.8 percent higher.
Most underlying share prices, denominated in rubles, were stronger
as markets reacted to relative calm in eastern Ukraine where a
ceasefire is broadly holding. Leading bank Sberbank was up 1.9
percent, oil major Rosneft up 1.2 percent, and Gazprom up 1
percent.
(Reporting by Alexander Winning and Jason Bush; editing by John
Stonestreet)
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