Ruble Drops Against Basket in Emerging-Markets Rout; Bonds Fall
The ruble weakened for a second day as speculation that the U.S. will scale back stimulus and violence in Syria will escalate fueled a sell-off in emerging-market currencies.
The ruble depreciated 0.3 percent to 38.1817 against the central bank’s euro-dollar basket by 2:21 p.m. in Moscow, heading for the lowest close since August 2009. The yield on the government’s ruble debt due February 2027 increased eight basis points, or 0.08 percentage point, to 7.99 percent.
Currencies including India’s rupee and the Turkish lira declined after U.S. Secretary of State John Kerry yesterday denounced an attack last week on a Damascus suburb as a “cowardly crime” requiring a response against Syrian President Bashar al-Assad’s regime. The Bloomberg U.S. Dollar Index approached the highest in three weeks on speculation the U.S. economy is strong enough for the Federal Reserve to start curbing bond-buying.
“The ruble got caught in the maelstrom of selling in Asian currencies,” OAO Rosbank analysts led by Vladimir Kolychev said in an e-mailed note.
JPMorgan Chase & Co.’s Emerging Markets Currencies index fell 0.3 percent to 87.77, extending a 0.9 percent drop yesterday. India’s rupee fell 2.1 percent to a record low against the dollar, Indonesian rupiah fell 4.5 percent, and the lira weakened 1.3 percent.
The ruble weakened 0.4 against the dollar to 33.1875 and 0.3 percent against the euro to 44.2960. Brent oil gained 1 percent to $111.82 per barrel.
Former Treasury Secretary Larry Summers is the “odds-on favorite” to be President Barack Obama’s pick to succeed Ben Bernanke, First Trust economists wrote in a research note. This nomination may only speed up the American central bank’s “exit strategy” from the current monetary policy, Anton Zakharov, a money manager at OAO Promsvyazbank in Moscow, said in e-mailed comments.
“The problems of the Russian currency as an emerging market asset are aggravated by the news that Larry Summers is the favorite to become the next Fed Chairman,” he said.
Russia running a current-account surplus of $25.1 billion in the first quarter and $6.9 billion in the second is “fundamentally different” to Asian countries with current account deficits, Rosbank (ROSB) analysts say.
Given this and the oil trading around $111 per barrel, “the ruble’s prospects don’t look that pessimistic,” they said.
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