Reuters

London

Russia’s rouble has tumbled to successive record lows against the dollar, shrugging off central bank interventions and interest rate rises, and paying heed to only one factor – the oil price.

Brent crude futures have chalked up losses of 45% since the start of this year, touching five-year lows near $60 per barrel on Monday amid oversupply and weak demand.

The rouble too has fallen almost 45% against the dollar this year, moving in lock-step to the price of oil.

To defend the currency, Russia’s central bank cranked up its main lending rate by 100 basis points last week to 10.5% – the fifth increase so far this year. It has also spent around $75bn in currency interventions.

The size of last week’s rate rise was not nearly enough to break the rouble’s fall because it was based on an assumption that oil prices had stabilised, said Per Hammarlund, head of emerging market strategy at SEB in Stockholm.

“To change momentum they would need to hike by 200 basis points as a minimum to change the correlation with the oil price,” Hammarlund said.

The fall in oil prices is a bad omen for the Russian economy at a time when it is also being hurt by Western sanctions imposed over the Ukraine crisis. Energy provides roughly half of Russia’s export revenue and is its main source of hard currency.

Already, the World Bank estimates the economy will shrink 0.7% next year, assuming an average oil price of $78 per barrel.

Moscow is predicting a contraction of 0.8% in 2015, basing this on an average of $80.

Analysts polled by Reuters in early December predicted Brent crude would average $82.50 per barrel in 2015 but some are expected to cut forecasts further. Barclays for instance predicts oil at $67 a barrel in the first half of 2015.