Exchange Rate News: Russian Ruble (RUB) Falls as Manufacturing Disappoints

The Russian Ruble dropped against peers like the US Dollar on Monday as Russia’s Manufacturing Purchasing Managers Index fell to its lowest level for five and a half years. The gauge of the manufacturing sector dropped from the 48.9 recorded in December to 47.6 in January, falling further below the 50 mark separating growth from contraction and printing at the worst level since 2009. Economists had expected a reading of 47.9. The report prompted this response from HSBC economist Alexander Morozov; ‘Signs of contracting business activity became more visible. Meanwhile, price pressures intensified further, increasing the probability of a ‘bad equilibrium’: high price growth amid falling demand.’

The Ruble had previously slumped off the back of Russia’s credit rating being downgraded to junk status, and the currency experienced additional volatility after the Russian central bank unexpectedly cut interest rates on Friday. The interest rate adjustment gave the Ruble a little boost, but after the manufacturing report was published the USD/RUB exchange rate advanced to 70.6200 from a low of 68.4775. However, the Pound Sterling to Russian Ruble exchange rate softened to 103.8150 during the European session as Bank of England (BoE) interest rate hike speculation and the prospect of a closely-fought UK general election limited the Pound’s appeal.

Further Ruble fluctuations can be expected tomorrow when Russia releases its growth data for the fourth quarter. Economists have forecast that the nation expanded at a rate of 0.57% in the final three months of the year, year-on-year, following growth of 0.7% in the third quarter. Investors will also be taking an interest in Wednesday’s HSBC Services PMI and Thursday’s inflation figures. Services PMI is believed to have risen from 45.8 to 46.95 while the rate of inflation is expected to have eased from 2.6% on the month in January to 2.18%. On the year, the nation’s inflation is predicted to come in at 13.02%. Of course, additional volatility in oil prices and US data will also have an impact on the direction taken by the Ruble in the days ahead.