Ruble Drops Versus Basket as Nabiullina Picked for Central Bank

The ruble declined against Bank Rossii’s target currency basket of dollars and euros after President Vladimir Putin nominated his aide Elvira Nabiullina to head the Central Bank.

The ruble snapped two days of gains and weakened 0.1 percent against Bank Rossii’s dollar-euro basket to 34.9216 by 10.22 a.m. in Moscow. The Russian currency declined 0.1 percent against the dollar to 30.7190.

Putin nominated Elvira Nabiullina, 49, a former economy minister, to take over from Bank Rossii Chairman Sergey Ignatiev, who retires June 23 when his third and final term ends. Nabiullina’s appointment may lead to a weaker ruble as the market prices in an increased chance of monetary easing, reducing the currency’s appeal as a so-called carry-trade, VTB Capital and Bank of America Merrill Lynch analysts said.

“We see it as negative for the ruble and supportive for our outlook for 75 basis points of rate cuts this year,” Vladimir Osakovskiy, chief economist at Bank of America Merrill Lynch, said by e-mail. “She will most likely have a much greater pro-growth bias as former economy minister.”

Implied interest rates on six-month non-deliverabe forward contracts for dollars declined five basis points to 6.27 percent.

The initial negative market reaction will be short-lived, according to VTB Capital chief economist Maxim Oreshkin. Oreshkin recommended investors buy into the weakness “since we do not expect strong front-loaded rate cuts in the coming months,” he said in a note to clients.

OFZ Auction

Yields on benchmark OFZ bonds due February 2027 declined two basis points, or 0.02 percentage points, to 7.34 percent.

The Finance Ministry will offer 4.21 billion rubles ($137 million) of five-year bonds and 8.42 billion rubles of 10-year bonds in an auction today.

ING Groep NV doesn’t expect strong demand at the auctions due to lack of optimism on global markets. “The only thing that can techincally support the demand is the rather low size of the offering,” ING’s Dmitry Polevoy and Egor Fedorov wrote in an e- mailed note to clients.

To contact the reporter on this story: Vladimir Kuznetsov in Moscow at

To contact the editor responsible for this story: Wojciech Moskwa at

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