The Pound Sterling to Russian Ruble (GBP/RUB) exchange rate advanced to a new record high earlier on Monday before softening slightly as rumours spread that the Russian Central Bank took action to reduce the Ruble’s sharp decline.
The Ruble tumbled for a fifth consecutive day as oil prices plunged to a new five year low.
Oil producing economies have been hit hard by the Organisation of the Petroleum Exporting Countries (OPEC) decision to not taper production of the commodity.
Oil prices have been falling steadily over the past few months due to a glut in supply and softer demand.
After the OPEC announcement, the Russian Ruble declined by 4% against the US Dollar and fell sharply against the majority of its most traded peers.
Also weighing upon the Ruble was data out of China, which showed that manufacturing activity in the world’s second largest economy stagnated in November.
With concerns growing over a global economic slowdown, investors ditched the Ruble in favour of safer assets such as the US Dollar and Pound.
‘Over-optimistic global growth forecasts have been pared back, and probably rightly so, and also China has come back on to the radar. And that of course has become a big driver for a lot of commodity prices,’ said Neil Williams, chief economist at London based fund manager Hermes.
The Ruble had been in freefall before regaining some ground.
It was that slight slowdown of its downward trajectory that triggered speculation that the Russian Central Bank took action to try to stem the sharp losses caused by falling oil prices.
Also continuing to weigh heavily upon the Ruble are the economic sanctions being imposed by the US and European Union.
Some economists speculate that the Russian economy could lose up to $140 billion per year due to the combination of sanctions and falling oil prices.
Russia is one of the world’s leading producers of the commodity.
‘Since making its most recent peak in June at $115.71 per barrel, Brent crude is down 39%, during which the ruble fell 37%. Interestingly, the ruble’s decline matches that of the 2008-2009 when oil price crashed more than 75%. For the ruble to fall by the same magnitude on the back of an oil decline that’s half that of 2008/9 highlights the sobering fact that there’s more to ruble’s woes than just falling oil,’ said economist Ashraf Laidi.
The Pound meanwhile found support from a better than forecast manufacturing Purchasing Managers Index (PMI) report.
The data showed that activity in the sector increased unexpectedly in November.
