China’s Covid Restrictions Weighing on Global Markets
In the global markets, the Russian Ruble as well as Russian oil failed to show some resistance against value declines. The reason is the rapid spread of the Covid-19 pandemic in China and its impact on the global trade markets.
Ruble versus the USD and Euro
Against the major currencies of the world namely the USD and Euro, the Russian ruble lost 0.4% (i.e. 60.75) when it came head to head with the USD. Against the Euro, Ruble’s performance was noticeably flat.
Earlier, the Russian Ruble was being aided by end-month taxation wherein local exporters cleared their tax liabilities by utilizing their foreign currencies.
However, when the Ruble lost value against the USD and Euro, the exporters became reluctant in converting their foreign currencies into national fiat. Resultantly, the exporters’ demand for the local currency was subsequently outweighed.
Brent Crude Oil Value Decline
One of its major exports of Russia is crude oil and the country’s benchmark for crude oil is Brent.
China is, however, the biggest importer of crude oil and therefore one of China’s major crude oil suppliers is Russia.
Since lockdowns have been imposed in China and there are import restrictions, hence China’s demand for crude oil has reduced significantly.
As a consequence of China’s reduced demand for crude oil, Brent stocks fell as low as 2.6% (i.e. $81.01 per barrel).
Oil Prices Global Fall
Prices for oils globally have fallen significantly beyond the level of 17% since the beginning of November. The fall is attributed to the fears stemming from the European region which is expecting a slowdown in the regional economy.
Russia is exerting a lot of pressure on the European economy because it has control over the majority of its energy resource. Europe is dependent on Russia for energy supply.
However, the European Union has continued hitting Russia with sanctions but Russia knows how to get to the EU. It has reduced its energy supply to Germany, which distributes it to the rest of the continent.
Russia has reduced its energy provisioning to Europe, bringing it down to just 5% of what it was providing them before the sanctions. This has caused a great and lingering dent in the European economy.
Similarly, the slowing down of economy fears are also expected by the US which is further coupled with the fears of Covid rise in China.
Compared to the Chinese Yuan, the Russian Ruble was somehow able to witness a rally. Against Yuan, Ruble scored 0.2% upward.
Similarly, Russian stock markets were slower than expected which was due to the fact that investors were avoiding risky assets.
The RTS index, which is more or less dominated by the USD, was however down by at least 1.1%.
On the other hand, the Russian index of MOEX was also down by 0.9%.
Negative Sentiment Likely To Continue
According to analysts, negative sentiment will continue to prevail and haunt Russian markets throughout this week.
They claimed that Russian markets are under immense pressure stemming from China and the crude oil cap proposed by G7 countries.
It is further expected that Russian markets will observe more pressure because of investors avoiding risky assets. In addition, pressure is already on because of the oil prices decline globally.
Hence, further declines are expected in the Russian markets, said Bogdan Zvarich of Banki.ru analytical firm.