Ruble Strengthens from One-Month Low as Weakening, Crude Oil Lures Traders

The ruble rebounded from its weakest level in almost a month against the dollar as rising oil prices spurred traders to buy the currency at cheaper levels.

Russia’s currency gained 0.6 percent to 30.73 per dollar by 11:20 a.m. in Moscow, after dropping to the weakest since Sept. 23 yesterday.

The ruble was the worst performing developing market currency versus the dollar tracked by Bloomberg yesterday. It slumped to its weakest level against the central bank’s dollar- euro basket since December amid speculation investors were testing the currency’s new corridor, which Bank Rossii expanded to 4 rubles from 3 on Oct. 13, according to Ivan Tchakarov, chief Russia economist at BofA Merrill Lynch Global Research. Crude, Russia’s chief export earner, gained for a second day, rising as much as 1.1 percent to $82.70 a barrel in New York today.

Yesterday’s declines were “just pure panic with the central bank choosing an inopportune time to change its intervention strategy at a time of declining current-account surplus,” Tchakarov said in an e-mail interview in Moscow. “Time seems ripe for a reversal.”

Russia is easing its control over the ruble as other emerging markets try to limit their currency’s strength and restrict foreign investors’ access to local assets. While Brazil doubles a tax on bond purchases by overseas investors, South Korea audits banks’ foreign currency trading and South Africa buys dollars to stem gains in the rand, Russia is becoming more “marginal” as it moves toward allowing the managed currency to trade freely by a 2012 target, Bank Rossii’s First Deputy Chairman Alexei Ulyukayev said Oct. 5.

Ruble Versus Euro

The ruble weakened for a second day against the euro, slipping as much as 0.6 percent to 43.0029 per euro, the weakest since Jan. 13. It was little changed at 36.1970 versus the basket, which Bank Rossii uses to minimize swings in the ruble that hamper exporter competitiveness. The currency has weakened versus the basket in the last seven trading sessions before today, the longest run of losses since August 2009, according to data compiled by Bloomberg.

The basket rate is calculated by multiplying the dollar- ruble rate by 0.55, the euro-ruble rate by 0.45, then adding them together. The so-called floating corridor monitored by the central bank after last week’s expansion is 32.9 to 36.9, according to UniCredit SpA. Ulyukayev refused to confirm its parameters.

‘Sentiment Catches Up’

Russian companies need to pay back more than $12 billion of foreign currency-denominated loans in December, the most since at least September, Tchakarov wrote in a research note e-mailed today. This demand for dollars and euros will subdue the ruble through to the end of the year, he said.

Merrill is advising clients to start putting so-called long positions on the ruble, or bets on its appreciation, in the middle of December as the impact of redemptions subsides and “as sentiment catches up with equities and investors internalize the central bank’s new intervention policy,” Tchakarov said.

The ruble is not in a “weakening” trend, German Gref, chairman of OAO Sberbank, Russia’s largest lender, said today by video address to a conference in Moscow.

Russia plans to sell holdings in companies it has controlling stakes in including OAO Rosneft, OAO Aeroflot, VTB Group and Sberbank, First Deputy Prime Minister Igor Shuvalov said late yesterday. This process will provide “medium-term” support for the ruble as investment inflows into the country are bolstered, Royal Bank of Canada analysts led by Nick Chamie, global head of emerging markets, wrote in a research note e- mailed late yesterday.

NDFs

Options traders have become more bearish on the ruble, with the currency’s one-week risk reversal rate -- the premium of put options over calls -- at 1 percent today, from as low as 0.5 percent at the beginning of the week, according to data compiled by Bloomberg. Non-deliverable forwards, known as NDFs, which provide a guide to expectations of currency movements and interest-rate differentials, show the ruble weakening to 30.9875 per dollar in three months, from yesterday’s 30.8995.

The yield on Russia’s dollar bonds due 2020 snapped five trading sessions of declines, falling by five basis points to 4.25 percent. Dollar bonds maturing 2015 rose, pushing the yield down 13 points to 2.99 percent.

To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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