Ruble Declines after Fitch Slashes Russia’s Credit Rating

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Ruble Declines after Fitch Slashes Russia’s Credit RatingThe ruble dropped for the second day while Russian debt default insurance rose after credit scoring agency Fitch Ratings cut the nation’s credit rating to just one level above junk status. Crude oil prices fell to less than $50 per barrel.

The Russian currency fell 1.9 percent to trade at 62.7359 against the dollar as of 1:25 p.m. Moscow time. The 5-year bond yield increased 84 basis points to 16.26 percent, the most since Dec. 17. The 5-year debt default swaps rose 6.5 basis points to 585, ranking it fifth among the world’s riskiest credit.

“Oil remains the key factor pressuring the Russian financial markets,” Slava Smolyaninov, a Moscow-based chief strategist at UralSib Financial Corp, told Bloomberg News. “The Fitch downgrade brings Russia closer to the verge of the non-investment grade status, clearly. The bond market has already priced in Russia far below the current ratings.”

The Brent crude fell 2.6 percent to trade at $48.81 per barrel after declining 11 percent the previous week. Russia depends on oil and gas revenue to finance about 50 percent of its budget.

Meanwhile, the Taiwan’s dollar grew the strongest since November while the dollar plunged after a surprise decline in U.S. wages lowered probability of an early increase in interest rates by the Federal Reserve.

The currency increased 0.3 percent, the fastest since Nov. 10, to trade at NT$31.856 versus the dollar. The 1-month non-deliverable forwards jumped 0.1 percent to NT$31.879, data gathered by Bloomberg showed.

The median U.S. hourly wages fell 0.2 percent last month from November, the most on record. Weak growth in earnings is expected to influence the central bank to delay tightening policy. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Yashu Gola at john@forexminute.com