Rouble suffers huge 1-day decline as oil prices drop

<p>The rouble suffered its largest one-day decline since 1998 on Monday.</p>

The rouble continues to struggle against the backdrop of falling oil prices.

Figures released on Monday (December 1st) showed that the Russian currency had suffered its biggest one-day decline since 1998 sliding nine per cent against the dollar. The rouble did rally following a suspected intervention by the central bank but it has raised further concerns about the future of the Russian economy.

Russia relies on the strong performance of the oil market. As one of the biggest producers in the world it is dependent on revenues from oil exports. This has made it vulnerable to the falling prices which are currently being felt in the industry. Brent crude fell to $67.53 (£42.95) a barrel on Monday, its lowest level since October 2009, while US crude was also down to five-year low of $66.34 a barrel.

Commenting on the rouble situation, Igor Zelentsov, Globex Bank senior trader, said: "Support for the rouble at present can only come from stabilisation of the oil price. Other factors now look secondary and of little significance."

The rouble has been falling considerably against the dollar since January with an almost 40 per cent decline following the turn of the year. Alongside a downturn in oil prices, the Russian economy has also been hit by the sanctions imposed by the West.

US and European Union officials introduced the measures after President Vladimir Putin annexed Crimea and showed support for separatists in areas of eastern Ukraine. This has caused increasing tensions between Russia and the West but it has also put immense pressure on the nation's economy.

Despite not being a member of the Organizations of the Petroleum Exporting Countries (Opec), Russia strongly opposed an option of reducing its oil production. There had been talk a move of this ilk to tackle falling price but Opec agreed to maintain production at 30 million barrels which was originally outlined in December 2011.

Find out about commodities trading and learn CFD strategies at City Index

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.