U.S. Markets closed

Russian assets sink on China scare, rouble hits 2015 low vs euro

The ruble lost around half of its value in 2014 but recovered slightly as energy prices stabilised this year (AFP Photo/Alexander Nemenov)

* Rouble sinks 4.1 pct vs euro, 2.3 pct vs dollar

* Still well clear of all-time lows vs both currencies

* Near-term central bank intervention seen unlikely

* Shares, bonds also slide in line with global mkts

* Little sign of panic on Moscow streets (Adds scene on Moscow streets, shares, bonds)

By Vladimir Abramov and Alexander Winning

MOSCOW, Aug 24 (Reuters) - Russia's rouble fell sharply on Monday, setting a new 2015 low against the euro and approaching another against the dollar as it reacted to a plunge in Chinese markets that spooked investors worldwide and sent oil prices to new multi-year lows.

There were losses too for Russian stocks and bonds, but there was little sign of panic dollar buying on Moscow's streets and analysts said the central bank was unlikely to intervene in the near future to prop up the currency.

The rouble is also suffering as Western sanctions imposed over the crisis in Ukraine make it hard for Russian companies to borrow abroad at a time when they need to refinance heavy overseas debts.

"Given all the negativity around the rouble, I can see only a one-way move down," said Konstantin Kostrub from ING Eurasia.

"If Brent falls to $40 per barrel, I can see the rouble hitting 75 per dollar".

At 1510 GMT, the rouble was 2.3 percent weaker against the dollar at 70.77 and had lost 4.1 percent to trade at 81.95 versus the euro. It fell less steeply against the dollar as the U.S. currency also fell on global markets.

Brent crude oil, a benchmark for Russia's main export, was trading down more than 4 percent on Monday at $43.60 per barrel after earlier falling below $43.

Russia's dollar-denominated RTS index fell 4.5 percent, while the yield on the country's 2042 sovereign Eurobond rose by 20 basis points, reflecting weaker prices.


The Russian currency is nearing a 2015 low of 71.85 to the dollar reached on Jan. 30, though it is still some way from an all-time low of 80 that it hit last December. Slightly more than a year ago, it traded at 33.

Russia's central bank has so far refrained from actively dipping in to its foreign exchange reserves, which stand at around $360 billion, to support the rouble as it did during the 2008/09 crisis.

Economy Minister Alexei Ulyukayev, who was first deputy central bank head during the 2008/09 crisis, said on Monday oil could briefly fall to below $40 per barrel, effectively preparing the market for new falls in the rouble.

Many analysts expect the central bank to refrain from major forex sales to save its hard currency for more critical situations, given that sanctions restricting access to Western capital are seen as staying in place for some time and oil prices are expected to remain low for the foreseeable future.

"Don't expect any active actions by the central bank to support the rouble. A weak rouble is becoming a new norm. For a long time," Maxim Buyev, the dean for economics at the European University of St Petersburg, wrote in an op-ed for the Vedomosti newspaper.

On Saturday, Prime Minister Dmitry Medvedev said authorities would encourage exporters to sell hard currency more actively. Exporters already have to cover part of their hard currency revenues every month to meet rouble-denominated tax payments.


There were no long queues outside exchange kiosks in Moscow on Monday, unlike in 2008 when a collapse in oil prices prompted people to rush to switch their savings into hard currency or last December, when the rouble hit all-time lows.

Some Moscow residents said most of their savings had already been exchanged during the current crisis and that any wealth accumulation had been eroded by rising prices, caused partly by a ban on certain food imports imposed in retaliation for Western economic sanctions introduced over the Ukraine crisis.

"When you look at which measures our government is taking, it's all restrictions," a Moscow resident who introduced himself as Yevgeny told Reuters television.

"It feels like our authorities are fighting for their own survival, to remain in power, rather than for the interests of the economy."

While the rouble's slide has massively benefited exporters of Russian oil, gas, metals and other commodities, it has hurt importers and ordinary Russians.

Inflation has surged to levels not seen since the early years of the presidency of Vladimir Putin, who came to power in 2000 and prides himself on ensuring stability and prosperity after the chaotic years that followed the collapse of the Soviet Union.

The crisis has also hit the tourism sector, with around 40 percent fewer Russians travelling abroad this year as they are being forced to spend more on basic goods.

Buyev said the population was more patient than during the volatile 1990s and that neither the devaluation during the 2008/09 crisis nor that of December last year had led to a run on the banks.

Putin's approval ratings also remain very high, supported by a patriotic mood encouraged by Russia's annexation last year of Crimea from Ukraine.

(Additional reporting by Gleb Stolyarov, Katya Golubkova and Reuters Television; Writing by Dmitry Zhdannikov; Editing by Gareth Jones)