“Turbulence” on global financial markets ongoing since the beginning of the year has already brought many unpleasant surprises to investors. One of the most recent was a dramatically increased correlation between oil prices and quotations of high — risk assets (primarily shares) in the developed countries.
In theory, the reduction in fuel costs should support the economy of developed countries (which, as a rule, are net importers of oil). In practice, US investors become accepting a further decline in oil prices down to new many-year (over 12 years) minimums as a sign of continuing imbalance of this key commodity market and growing problems with oil production the US itself (and its dependent other sectors of the US economy, including financial).
As for the ruble, its movements in January were generally in line with fluctuations in oil prices, with the only difference that until recently the fall of oil quotations was as a rule much faster than weakening of the ruble against the US dollar. Since early this year, the price of Brent blend has decreased by 18% from $38/bbl to $31.4/bbl (and in the middle of last week, fell below $28/bbl). Meanwhile, the ruble since the beginning of the year has lost 10% against the dollar (falling from 73 to almost 80), reaching on 21 January the absolute minimum at 86 to the dollar.
In fairness, note that by the end of January the price of oil almost returned to its New Year’s values. At least on 28 January, Brent exceeded $36 per barrel after the Russian Energy Minister Alexander Novak informed about possible meeting of oil-producing countries in February. Following the oil, the ruble quickly began to strengthen - up to the level of 76 RUR/USD.
On the background of sharply increased volatility on oil and currency markets, the Bank of Russia remained enviably calm, and comments of its chairman on 20 January on approaching of the ruble to its fundamentally justified levels were interpreted by the market as a sign of unwillingness of the Central Bank to maintain the exchange rate by interventions or measures of monetary policy and caused even more rapid weakening of the ruble.
“Excessive” ruble strengthening (in relation to oil prices) threatens with aggravation of problems with the budget wherein the price 3,165 rubles/bbl of Urals crude is embedded, which differs from the current price by almost 40%, as well as with a short-term reduction in the foreign trade balance. Since the Central Bank continues to closely follow the principle of “do not give away reserves”, then only “verbal” interventions followed at most tense moments, including comments on possible restoration of mandatory sale of a part of currency proceeds and convocation of an emergency meeting with representatives of commercial banks. Given that the main purpose of the regulator still is to reduce the inflation while the stability of current account of balance of payments is ensured by almost a double-digit drop in real wages and government measures on restriction of mass tourism and certain categories of food imports, it can be assumed that the Central Bank is not interested in weakening of the ruble lower a psychologically important mark of 90 rubles per dollar.