The Petrodollar Dominoes: How The Strong Dollar Is Slamming Oil Exporters (And Other BRICs)

A week ago the Russian Ruble exhibited intraday volatility that makes the JPY look quiet when it crashed to record lows then soared dramatically on intervention hopes. Since then we have had a Russian Central Bank disappointment and some jawboning which did nothing press the Ruble to record-er lows against the USD. Then today, last week's volatility in the Ruble was dwarfed when USDRUB blew past 48.5 only to be sent soaring (USDRUB lower) below 46 on hope of intervention. Russia is not alone. The Saudi Riyal has seen massive vol in recent weeks and Nigeria, another oil-producing nation, saw the Naira collapse yesterday then soar 8 handles this morning on what is confirmed intervention by the nation's central bank. It appears the strong dollar is becoming an issue for the world's oil-producing nations...

 

Ruble vol explodes on hopes for interventions...

 

 

 

 

And Nigeria's Naira plunged then soared today on confirmed intervention...

 

And then there is the massive volatility in the Saudi Riyal

 

As the humpties of the BRICS fall off the wall one by one...

 

It would appear the strong dollar is having significant implications for the rest of the world.

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Bank of Russia has issued a statement

  • *BANK OF RUSSIA READY TO INCREASE INTERVENTIONS AT ANY TIME
  • *BANK OF RUSSIA: WEAKER RUBLE NOT NEEDED FOR BALANCE OF PAYMENTS
  • *BANK OF RUSSIA SEES RUBLE VOLATITY CONTINUING AS MKT ADAPTS
  • *RUBLE NEEDS TIME TO ADAPT TO NEW POLICIES: BANK OF RUSSIA

On the foreign exchange market

In recent months, the dynamics of the ruble exchange rate and its impact on the financial and real sectors of the economy is causing concern. The observed weakening of the ruble caused by a number of fundamental factors, primarily, lower oil prices and limited access to external capital markets.

 

In order to limit the rate of depreciation of the ruble only during October the Bank of Russia intervened in the amount of 30 billion. US dollars.

 

The Bank of Russia November 5, 2014 decision to change the mechanism of exchange rate policy, along with an increase in the key rate and the introduction of currency repos are part of a package of measures aimed at ensuring financial and price stability in the new environment.

 

Changes in the exchange rate policy aimed at accelerating ruble equilibrium value, the rate of reduction of excess spending reserves, preventing the formation of stable devaluation expectations in continuous depreciation of the ruble. In addition, this solution will help minimize the impact of the foreign exchange market on the structural liquidity deficit. At that exchange rate flexibility achieved allow to mitigate the impact of external shocks on the financial sector and the economy as a whole.

 

In accordance with the decision logic course started to adjust, which is accompanied by an increase in volatility. The adaptation process of the currency market to a new mechanism of exchange rate policy will take some time, during which there may be multi-directional movement of the course.

 

According to the Bank of Russia, taking into account the package of measures and the depreciation of the incident further weakening of the ruble is not required to achieve the balance of payments.

 

In recent days, there are signs of excessive demand, which creates conditions for the formation of the risks to financial stability. In these circumstances, the Bank of Russia is ready to increase foreign exchange intervention at any moment, and to use other means at its disposal financial market instruments.

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Charts: Bloomberg