Russia: Ruble slumps at 2020 outset as coronavirus fears mount and oil prices dive
The Russian ruble lost significant ground against the U.S. dollar in the opening months of the year, weighed on by plunging global oil prices and a softening GDP growth outlook amid fears over the full impact of the coronavirus outbreak. On 6 March, the ruble ended the day at 68.6 per USD, down 7.6% from the same day last month. Furthermore, the RUB depreciated 9.7% against the USD in year-to-date terms and was down 3.9% from the same day of last year.
The increasingly disruptive coronavirus outbreak has been the key driver behind the Russian currency’s continued depreciation. The outbreak has dented global oil demand, in turn sending global oil prices tumbling through early March: Brent crude dipped to an over two-and-a-half year low of about USD 47.0 per barrel on 6 March. Whereas the downturn in oil industry bodes particularly ill for the country’s external sector—oil and gas accounts for the lion’s share of Russia’s exports—fears of the impact of the virus fallout on domestic activity further weighed on the overall GDP outlook, thus hurting the ruble even more. Meanwhile, recent rate cuts by the Central Bank added additional downward pressure on the ruble, with monetary policy easing set to continue in the months ahead.
Looking forward, a darkening global growth outlook, coupled with a marked downturn in global oil prices after Saudi Arabia announced its intention of launching a price war against Russia on 8 March, bodes ill for the rubble in the months ahead. On 9 March, the Russian currency fell to an over four-year low of around RUB 75.0 per USD as the price for Brent crude plummeted to below USD 35.0 per barrel, marking the biggest fall since the 1991 Gulf War. Although our panelists currently expect the ruble to rebound towards the end of the year, increasing uncertainty over both the full impact of the coronavirus outbreak and global oil production levels are major downside risks to the outlook.