Ruble Heads for Sixth Monthly Drop Amid ‘Toxic’ Currency Risks

The ruble headed for a sixth month of declines as investors pulled funds from developing-nation assets amid prospects of U.S. stimulus cuts and slower growth.

The ruble traded little changed at 38.0914 versus the central bank’s euro-dollar basket by 2:35 p.m. in Moscow, headed for a 0.6 decline in the month and an 8.6 percent drop since the end of February.

Russia-dedicated bond funds lost $181 million in the five days to Aug. 28, their 14th week of outflows, OAO Gazprombank said today, citing EPFR Global data. The U.S. Federal Reserve will begin to slow its debt purchases at a Sept. 17-18 meeting, according to 65 percent of economists in a Bloomberg survey conducted this month. Russia’s current-account surplus decreased to $6.9 billion in the second quarter from $25.1 billion in the first quarter. Brent oil fell 0.1 percent to $115.03 a barrel.

The ruble has weakened due to “a toxic combination of risks related to policy tightening in the U.S., a slowdown in China and domestic reasons, mostly related to the structural deterioration in the balance of payments,” Vladimir Kolychev, economist and strategist at OAO Rosbank (ROSB) in Moscow, said in e-mailed comments.

The Economy Ministry forecasts the current-account surplus in 2013 will decline to $26 billion from $75 billion in 2012. The ruble was little changed against the dollar at 33.2550 and steady versus the euro at 44. The yield on the government’s ruble debt due February 2027 fell three basis points, or 0.03 percentage point, to 8.02 percent.

Possible Outperformance

“The same combination of external risks is likely to prevail in September, but on the domestic front seasonal demand for hard currency has likely peaked in August,” Kolychev said. “Hence, the ruble may outperform broader emerging-market peers, but is clearly not immune to another wave of the selloff in emerging currencies.”

Bank Rossii raised its currency corridor 5 kopeks as of Aug. 29, the regulator said today on its website. That’s the sixth five-kopek shift in August. The central bank raises or lowers the trading band as soon as accumulated interventions reach $450 million.

Russia’s central bank sold 13.28 billion rubles ($399 million) of foreign currency on Aug. 28, bringing the total spent since May 29 to almost 446 billion rubles.

To contact the reporter on this story: Vladimir Kuznetsov in Moscow at vkuznetsov2@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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