The New Zealand dollar rose to a record against the Russian ruble amid concerns about the outlook for the Russian economy after OPEC decided against cutting oil production to bolster falling prices and as sanctions against Russia look set to continue for an extended period.
The kiwi touched a record 38.38 rubles, and was trading at 38.27 rubles at 8am in Wellington, from 37.49 rubles at 5pm yesterday. The local currency slipped to 78.69 US cents, from 79.11 cents yesterday when the US was on holiday for Thanksgiving.
The ruble slumped after OPEC ministers decided to maintain the group's production targets, instead of curbing supply to help a slide in prices. Brent crude oil slid below US$72 a barrel for the first time in more than four years. Oil and gas account for around two-thirds of Russia exports. Also weighing on the ruble were comments by German chancellor Angela Merkel this week that continued sanctions against Russia are "unavoidable" and that it will take "patience and perseverance" to end the crisis in Ukraine.
"It's the same with any producer of oil, obviously the margins are getting squeezed between what they can get it out of the ground for and what they sell so as the market comes down, obviously they are going to be earning less and it puts pressure on their economy along with the other western world sanctions on them," said Martin Rudings, senior dealer, foreign exchange at OMF.
"Merkel said they are preparing for a long haul with sanctions with Russia so that deepened the fact that there is no ending in sight and Russia is getting squeezed really with sanctions. If they are preparing themselves for a long, drawn out sanction on Russia then it's really going to bite hard for Russia."
