The Russian ruble plunged as much as 6% on Monday morning, following crude oil prices down and not bouncing much when crude prices bounced back later in the day.

The 6% decline in the ruble was the largest daily decrease since the 1998 crisis when the currency was devalued and Russia defaulted, to just under 54 rubles to the dollar. The volatile trading session in Moscow ended with the ruble just touching 52 to the dollar.

Russian Ruble Has Biggest Plunge Since 1998 Crisis

Central bank intervention to protect Russian ruble?

A number of traders noted that the recovery in the ruble seemed to be related to intervention by the Russian central bank, which doesn’t report its activities in real time. Of note, the Russian ruble is now down nearly 40% against the dollar this year, making it the second-worst performing currency. The latest drop in the ruble also sent Russia’s benchmark RTS stock index dropping, and the cost of insuring debt also popped Monday.

Statements from forex market professionals

“The ruble is a no-touch as long as oil prices go down. It is all about the oil, and the central bank’s slow reaction, as they don’t want to burn reserves too fast,” commented Viktor Szabo, a portfolio manager at Aberdeen Asset Management.

“It’s difficult to call the bottom with liquidity so thin and the oil price continuing to slide,” pointed out Daniel Wood, a portfolio manager at London-based FFTW. “Although the oil price is a contributing factor to the currency move, I think that negative sentiment toward Russia is helping to exacerbate the move to current levels.”

Russian public sentiment

“To say there is no panic among the population about the situation on the currency market wouldn’t be quite accurate,” explained Alexei Yegorov, chief analyst at Promsvyazbank. He continued to say, “the majority of the economically active population has already converted some of its savings to foreign currency.” He also noted that most other Russians have no savings to speak of.

Given that oil is Russia’s largest export and no prospects for much higher prices soon, central bank officials have been preparing the population for more declines in the ruble. Kseniya Yudaeva, the first deputy chairwoman of the central bank, recently spoke to regional officials, telling them that a further drop in oil prices is “highly probable”. Yudaeva also noted that the central bank was currently planning for crude prices to fall down to $60 a barrel and remain there for some time.