The ruble collapsed on Monday to 10 percent, its biggest drop since 1998, amid a collapse in Russian markets seems to crown a disastrous year for the US economy.
This year investors have left Russia, amid Western sanctions and the increasingly bleak economic outlook, which triggered a collapse in the Russian currency, to reach a record low in its parity of 64.45 rubles per dollar and 81.35 per euro.
The official bleaker prognosis so far by Moscow, the Russian central bank warned that GDP may shrink between 4.5 and 4.7 percent if oil prices remain at $ 60 per barrel.
This year the ruble has lost half of its value against the dollar, making the currency in which performance was worse in the world, ahead of the Ukrainian hryvnia.
Traders said the central bank intervened several times during trading yesterday, but could not stop the fall of the ruble by more than a few minutes at a time.
“There’s panic in the local markets driven by the inaction of the central bank, “said Benoit Anne, head of emerging markets at Societe Generale.
” Maybe Russia is not on the verge of a financial crisis, but is very close to losing their . investment grade status “
The massive sales swept all asset; the shares of Sberbank, the largest bank in Russia, fell 6.3 percent and Rosneft, the state oil company, fell 4.4 percent.
In dollar terms, the benchmark MICEX has fallen 26 percent this month, on track to record the biggest monthly drop since October 2008.
In the bond markets, the performance of international government bond denominated in dollars rose more than half a percentage point, to reach to 7.22 percent, above the equivalent yields of Rwanda, Ivory Coast and Peru.
Calling red Monday Timothy Ash, emerging markets strategist at Standard Bank in London, said the collapse demonstrated the lack of investor confidence in the Russian economy. “It’s not just oil, is by sanctions, geopolitical risk … and lack of political action by the Russian authorities”.
In a further sign of weakness in emerging markets, the lira Turkish weakened throughout the day yesterday, to reach a record low of 2.39 per dollar, down more than 4 percent on the day, before achieving a marginal recovery.
Additional Information Daniel Dombey / Istanbul
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