Rouble falls most in emerging markets

Moscow - The rouble has weakened the most in emerging markets after Iran called a Russian-Saudi plan to freeze oil production "ridiculous."

The currency fell 2.4% to 77.13 per dollar just after lunch in Moscow, the biggest decline in three weeks, as Brent crude retreated 2% to $32.59. The proposal between Russia and Saudi Arabia to cap output at January levels puts “unrealistic demands” on Iran, said oil minister Bijan Namdar Zanganeh, according to the ministry’s news agency Shana.

Oil’s collapse to a 12-year low amid a global glut has weakened the rouble to unprecedented levels, put Russia’s economy on course for a second year of contraction and forced the government to consider budget cuts. If Brent falls below $32.68 a barrel, the rouble may drop back to this month’s low of 80.64 per dollar, according to Rabobank.

“Comments from Iran’s oil minister fueled market doubts that other oil producers will respect the agreement to freeze oil output,” said Piotr Matys, a strategist for emerging-market currencies at Rabobank in London.

Three-month implied volatility, a measure of exchange-rate swings used to price options, is the highest in emerging markets at 26% after Argentina’s peso, suggesting investors anticipate rouble price swings to persist, data compiled by Bloomberg show.