The ruble sank the most in two months as oil fell and investors bet on declines after the Finance Minister supported a weaker currency.
The ruble dropped 1.1 percent against the central bank’s dollar-euro basket, the most since April 17, to trade at 36.8825 by 1:26 p.m. in Moscow. The yield on OFZ ruble bonds due 2027 rose eight basis points to 7.64 percent.
Russia is weighing a weaker ruble to spur flagging growth and is considering buying foreign currency on the market before sending oil and gas revenue to its Reserve Fund, Finance Minister Anton Siluanov said in an interview last week. Crude oil, Russia’s main export earner, declined 0.2 percent to $105.26 a barrel in London. The Bloomberg-JPMorgan Asia Dollar Index, which tracks the region’s 10 most-traded currencies, slid to the lowest level since Sept. 12.
A drop in emerging-market currencies and oil are the main reasons for the ruble’s retreat, Dmitry Polevoy, analyst at ING Groep NV in Moscow, said in e-mailed comments. “Siluanov is only an additional factor to realize that authorities prefer weaker ruble.”
The ruble depreciated 0.8 percent against the dollar to 31.3997. Three-month volatility rose 13 basis points to 10.015, compared with this year’s high of 11.1950 on June 7, data compiled by Bloomberg show.
Conducting transactions for the Reserve Fund on the market would be “a neutral operation in terms of buying and selling currency, which, according to estimates, may weaken the ruble exchange rate by 1 to 2 rubles,” Siluanov said.
In current market conditions, the net impact of the Finance Ministry’s purchases on the local currency market should be relatively muted, Vladimir Tikhomirov, chief economist at Otkritie Financial Corporation, said in an e-mailed note.
“If oil prices remain at their current levels, the Finance Ministry will need to buy a maximum of $2 billion to $3 billion a month, which accounts for only 0.5 percent to 1 percent of the monthly turnover in dollars on the Moscow Exchange,” Tikhomirov said.
The comments are having a psychological effect on the currency, according to Mikhail Palei, foreign exchange trader at VTB Capital.
“If the finance minister says the ruble to dollar could be 1 to 2 rubles weaker, people start worrying,” Palei said in e-mailed comments.
The Bloomberg Composite Index (BEM) of emerging-market dollar-denominated debt rose less than 0.1 percent on June 17 to 133.56, climbing for a fourth day.
Bank Rossii, which reports FX intervention data with a one-day lag, spent the equivalent of 2.2 billion rubles of foreign currency on June 14, about a third of what it spent in previous four days. According to traders, the central bank intervenes after a level of 35.65 rubles against the basket.
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