Russia plots FX move as ruble nears 2015 low

The Russian ruble slumped to near 2015-lows on Monday, extending a drop that Moscow has said it will try to combat through foreign currency sales.

Russian Prime Minister Dmitry Medvedev said on Saturday that the government and the central bank were preparing measures to boost foreign currency sales in an effort to prop up the weakening ruble, according to Reuters.

Russian President Vladimir Putin (R) and Prime Minister Dmitry Medvedev (L) attend a meeting in Moscow in May 2015.
Sasha Mordovets | Getty Images

The ruble traded as low as 71.20 to the U.S. dollar on Monday. It has fallen 23 percent in the last 30 days alone. The ruble's previous trough was hit on January 30, at 71.83.

Medvedev's words have increased speculation that state-owned exporters will again be ordered by the government to increase their own foreign currency sales, as occurred last December.

Analysts said that this could prove unpopular.

"Leaning on country's largest exporters beggars belief," Nicholas Spiro, managing director of Spiro Sovereign Strategy, a consultancy specializing in sovereign credit risk, told CNBC.

"It's a mild form of exchange rate controls and it's unlikely to prove effective in face of what is essentially a freight-train of falling oil prices."

A global market selloff, prompted by fears over Chinese growth, and a commodity rout that has seen oil prices drop below $40 per barrel, have compounded economic challenges posed by Western sanctions to Russia.

This comes at a time when several emerging market (EM) countries have intervened in their foreign currency markets, most notably China.

Currency wars: Who’s next to pull the trigger?

But outright currency sales by the Central Bank of Russia would "probably not be a wise option," Simon Quijano-Evans, head of EM research at Commerzbank, said in an email.

Quijano-Evans said the best option would be "verbal" intervention by the Russian Finance Ministry and a re-introduction of 12-month foreign exchange repos, or repurchasing agreements, where authorities agree to to buy back currency at a later date to boost the ruble.

Piotr Matys, an EM FX strategist at Rabobank, said that previous foreign currency sales may have proved futile in boosting the ruble.

"The CBR (Central Bank of Russia sold around $90 billion U.S. dollars throughout last year and the ruble weakened to a record low," Matys told CNBC in an email.

That all-time low was hit in December 2014, when the U.S. dollar neared 80 rubles.

If the ruble continues to fall, the pressure on Russia's central bank to raise interest rates will increase, Matys added.

The central bank last month cut its key interest rate by 50 basis points to 11 percent in July, as part of a series of gradual cuts since the bank jacked up rates to 17 percent last December.

"That rate cut last month is looking more and more reckless, and premature, with each passing day," Spiro said, adding that the December rate hike was "senseless."

But like many emerging markets, Russia has gotten itself into a tough spot, he added.

"The central bank is caught between rock and had place: you're damned if you do and damned if you don't."

Oil’s latest casualty: Mexico