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Russian Ruble Slumps as OPEC Maintains Production Supply

David Meyer

Key Global Foreign Exchange Indicators on December 7

Russian ruble falls to 3.5-month low

The Russian ruble fell by almost 2% against the US dollar on December 7, 2015, to its 3.5-month low as OPEC (Organization of the Petroleum Exporting Countries) decided in a meeting on Monday that no limits will be imposed on the output of crude by oil producing nations. Saudi Oil Minister Ali al-Naimi led the strategy to gain back considerable market share that OPEC had lost to other oil producers, particularly the United States.

Even as demands to reduce the supply by OPEC gained traction from Algeria, Ecuador, and Venezuela, the Saudi minister remained determined to keep oil prices low. Crude oil prices tumbled to seven-year lows on the news as speculation increased that oil prices would remain low for a long time in the future, raising concerns about a recovery in the Russian economy and causing a short position in the ruble.

Other crude currencies also bear the brunt

Other than the Russian ruble, other currencies, all highly correlated with crude prices, took a hit on Monday. The Canadian dollar fell by almost 0.9% against the US dollar while the Mexican peso fell by 1.3% versus the US dollar. The Norwegian krone also traded negative by 1.7% on December 7, 2015. The high supply maintained by OPEC has been weighing on the crude revenues in times when demand across various markets has been slowing down.  The growth in Russia’s GDP is expected to release this week along with a decision on monetary policy by the Bank of Russia. These factors are expected to be major drivers ahead for the ruble.

Impact on the market

ETFs were following a negative trajectory on December 7, 2015. The Market Vectors Russia ETF (RSX) provides exposure to companies that are publicly traded and domiciled in Russia. It fell by 3.4%. Also, the Direxion Daily Russia Bull 3X Shares ETF (RUSL) fell by 10.4%.

The negative trend was also evident in Russian ADRs (American depositary receipts). Mobile TeleSystems (MBT) fell by 5.1%. On the other hand, energy-related ADRs also fell. This included Canadian Natural Resources (CNQ), as it fell by 7.0%. Meanwhile, Baytex Energy (BTE) traded negative by 17.4%.

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