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By Bloomberg

The ruble weakened for a fourth day as Russia’s economy minister acknowledged the government risks losing its investment-grade rating amid a slump in oil that is tipping the economy into a recession.

The currency lost 0.9 percent to 65.82 per dollar by 12:30 p.m. in Moscow, bringing its four-day decline to 8.4 percent. The ruble trimmed a drop of as much as 2 percent after Finance Minister Anton Siluanov said Russia could convert as much as 500 billion rubles ($7.58 billion) of its $88 billion rainy-day Reserve Fund to support the currency, which he called “undervalued.” Government bonds and stocks climbed.

Oil’s 60 percent collapse from last year’s high is pushing the economy toward recession after U.S. and European Union sanctions over Ukraine shuttered foreign debt markets for Russian companies. Standard & Poor’s is reviewing Russia’s credit score and there’s a “fairly high” risk it will cut the world’s biggest energy exporter to a non-investment grade, Economy Minister Alexei Ulyukayev said at a conference in Moscow today.

“Expectations S&P might cut Russia to below investment grade have triggered a negative investor reaction to ruble assets,” Andrey Verkholantsev, head of research at Kapital Asset Management LLC in Moscow, said by phone. “Oil has fallen a lot and the ruble can’t resist such pressure.”

Russian assets have come under renewed pressure this year as Fitch Ratings last week knocked the sovereign’s credit rating to one level above investment grade. S&P is rethinking its score for the sovereign and has said it’s due to complete its review mid-month.

Junk Threat

A downgrade by S&P could trigger more outflows from Russian assets, according to Yury Tulinov, head of research at OAO Rosbank, Societe Generale’s local arm.

The yield on five-year local-currency bonds, known as OFZs, fell 12 basis points to 17.52 percent, paring the year-to-date increase to 211 basis points.

“If S&P cuts, they may have to close their positions, sell OFZ bonds, convert the rubles they receive into dollars and take them out of the country,” he said in e-mailed comments.

The cost of protecting the government’s debt against default using credit default swaps fell six basis points to 593, trimming its increase in January to 117 basis points and making it the fifth-riskiest credit globally, according to data compiled by Bloomberg.

Brent crude, which contributes about 50 percent of Russia’s state revenue together with natural gas, slid 0.4 percent to $46.40 a barrel, the lowest since March 2009.

Support from the Finance Ministry “does make sense under the assumption of oil rebounding from current levels,” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow said by e-mail.

“But it doesn’t for the alternative scenario of extra short-term weakening.”