Ruble Takes Biggest Hit Since Early July

The ruble weakened the most in five weeks against the dollar, and the MICEX Index slumped as concern about the pace of the global recovery curbed appetite for investments in the world’s biggest energy exporter.

The ruble fell 2 percent to 32.24 per dollar, its biggest decline since July 10. The MICEX Index fell 3.5 percent, after earlier sliding as much as 3.9 percent, the steepest intraday drop since July 6.

Urals crude, the country’s main export, fell 3 percent to $68.09 per barrel in Monday trading.

The ruble is “the iconic high-yielding, emerging market currency that people don’t want to have anything to do with when risk conditions are looking a bit unsupportive,” Manik Narain, strategist at Standard Chartered in London, said Monday. “There is some nervousness that markets have been pricing in too fast a pace of global recovery.”

Rosneft, the nation’s biggest oil producer, dropped 5.2 percent to 179.70 rubles a share. Shares of Norilsk Nickel, the country’s largest mining company, fell 3.5 percent to 3,234.46 rubles. Novolipetsk Steel, Russia’s biggest producer of the metal by market value, lost 2.1 percent to 78.05 rubles.

“The correlation between oil and the ruble over the course of this year is going to remain very strong,” Narain said. “It’s so critical for the management of cash flow in Russia and also given the deteriorating fiscal balance.”

Russia’s budget deficit widened in the first seven months to the equivalent of 4.3 percent of gross domestic product as the government spent 924 billion rubles ($28.7 billion) more than it collected, the Finance Ministry said Aug. 12. The gap could reach 9.4 percent of GDP this year, it forecasts.

Energy, including oil and natural gas, accounted for 68.8 percent of Russia’s exports to the Baltic states and countries outside the former Soviet Union in the first six months, according to the Federal Customs Service.

The ruble weakened 0.9 percent to 45.41 per euro. The movements against the dollar and the euro left the ruble down 0.7 percent at 38.15 against the Central Bank’s target currency basket, which it uses to manage swings that hurt Russian exporters.

The drop in Chinese equities “is driving the entire commodity rally to an end,” Shahin Vallee, an emerging-market currency strategist at BNP Paribas in London, said Monday. “You have a number of people with long ruble positions that are now reconsidering them on the back of something that looks like a change of outlook for commodities prices.”