Russian ruble goes hysterical and devalued again

The dollar rate hit the level of 33 rubles per dollar and even a bit higher at Moscow Currency Exchange (MICEX) on May 31st for the first time since the middle of 2009. The dollar was growing in Russia against the background of falling oil prices and the decline of the joint currency on the Forex market. Oil prices have been going down due to the critical situation in Europe.

As of 11:30 a.m., the average rate of the dollar against the Russian ruble made up 32.9173 rubles. The euro was traded on the level of 40.86 rubles per one euro.

The dollar has been strengthening because of the speculative play on the rise that occurred against the backdrop of the cheapening oil and the negative news from Europe about the Spanish debt market.

However, it is worthy of note that the Russian currency has been declining against both the dollar and the euro, whose rate successfully overcame the mark of 40 rubles and continued growing in the midst of the European debt crisis. Experts say that the current situation on the Russian market reminds the gradual devaluation of the Russian ruble at the end of 2008 and in the beginning of 2009. However, the decline of the ruble four years ago was based on the collapse of international stock and commodity markets.

Brent and WTI oil have been declining due to the prospects of the favorable solution of the crisis in Europe. Brent oil has decreased by 14% since the beginning of May, which marked the worst result since May of 2010.

The ruble has thus experienced a "black Wednesday" and lost nearly 60 kopecks of its value against the US dollar. The majority of investors turned to the dollar because of growing negative sentiments on the world market.

The rate of the euro dropped vs. the US dollar to the level of 1.24 dollars per one euro.

On Wednesday, investors paid prime attention to Spain, where the problems of the banking sector, particularly the nation's fourth largest bank, Bankia, led to increased profitability of Spanish ten-year government bond. In addition, Egan-Jones downgraded Spain's rating on Tuesday. This agency is considered fourth largest and most respectable rating agency after S&P, Moody's and Fitch.

The costs for the possible financial assistance to the country may reach nearly 380 billion euros. Germany, the basic creditor, may not accept such a volume, MarketWatch said.

Before May 30th, the Central Bank of Russia was conducting careful politics in the field of currency interventions. The bank was signaling the market that the Central Bank was ok with the weakening ruble. However, on Wednesday morning, the Central Bank increased the sales of currency on the home currency market 4.2 times as opposed to Tuesday. The volume of currency that was sold on Wednesday made up 2 billion 250 million rubles (nearly $69 million), Interfax reports.

On May 28th, the Central Bank acted as a currency seller on the currency market for the first time since the middle of January, when it sold $3.1 million. On Tuesday, the Bank increased the volume of intervention five times to nearly $16 million.

Officials with the Finance Ministry of Russia previously said that there were no serious reasons for the weakening of the ruble. "We have a serious inflow of currency in the form of export income. Oil prices have dropped, but they remain stable. They are high enough to ensure the necessary inflow," Finance Minister Siluanov said. 

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Author`s name Dmitry Sudakov