Ruble Advances Fourth Day Versus Dollar After China Cuts Rates

The ruble strengthened for a fourth day against the dollar and yields on Russia’s local debt declined on speculation policy makers will take steps to revive slowing economic growth, boosting riskier assets.

The Russian currency appreciated 0.5 percent to 32.25 per dollar by the 7 p.m. close in Moscow, the strongest level since May 29. Russia’s 140 billion rubles ($4.3 billion) of domestic OFZ bonds due August 2016 gained, cutting the yield by 30 basis points, or 0.3 percentage point, to 7.91 percent.

China cut borrowing costs for the first time since 2008 and loosened controls on banks’ lending and deposit rates, stepping up efforts to combat a deepening economic slowdown. European Central Bank President Mario Draghi said officials stand ready to act as the euro region’s growth outlook worsens.

“The ruble continues to win back the losses suffered in May,” Moscow-based Broker Credit Service wrote in an e-mailed note to clients. “The situation on the international markets is what’s contributing to these dynamics in Russian foreign exchange.”

The ruble was little changed at 40.55 per euro and appreciated 0.3 percent to 35.985 against the central bank’s target dollar-euro basket. Investors increased bets on the currency weakening, with non-deliverable forwards showing the ruble at 32.7555 per dollar in three months, compared with expectations of 32.8202 per dollar yesterday.

The yield on Russia’s Eurobonds due 2015 dropped five basis points to 2.311 percent. Dollar-denominated debt due the same year from OAO Sberbank, Russia’s largest lender, yielded five basis points less than yesterday at 3.842 percent, while the yield on state gas monopoly OAO Gazprom’s 2015 Eurobonds slipped 15 basis points to 3.735 percent.

The cost of insuring Russian bonds against nonpayment over five years with credit default swaps dropped 15 basis points to 246 basis points, the lowest on a closing basis since May 23.

To contact the reporter on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net

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

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