Ruble Weakens as Crude Declines After Industrial Output Falls

The ruble weakened against the dollar for the first time in five days after industrial production unexpectedly declined and oil dropped.

The ruble depreciated 0.6 percent to 32.7595 by 6 p.m. in Moscow, when the central bank stops its market operations. The yield on the government’s bonds due February 2027, known as OFZs, increased four basis points, or 0.04 percentage point, to 7.81 percent.

Output fell 0.1 percent in October from a year earlier after growth of 0.3 percent the previous month, according to Federal Statistics Service data released yesterday. That missed the median estimate of an 0.5 percent increase in a Bloomberg survey of economists. Oil, Russia’s chief export earner, fell 0.6 percent to $107.87 a barrel in London.

“Weakening of Russia’s economic fundamentals remains a problem for OFZs and the ruble,” Evgeny Koshelev, an analyst at OAO Rosbank (ROSB) in Moscow, said in an e-mailed note today.

Triggered by a 1.9 percent contraction in manufacturing, the drop in industrial output signals any improvement in economic growth from 1.2 percent in the third quarter is under a question mark, according to Vladimir Kolychev, chief economist for Russia at VTB Capital in Moscow. Gross domestic product growth will probably miss the government’s 1.8 percent target this year, Economy Minister Alexey Ulyukayev told reporters on Nov. 13.

The ruble weakened 0.6 percent against the euro to 44.2550 and dropped 0.6 percent against the central bank’s target basket of dollars and euros to 37.9317. An index of the 20 most actively-traded emerging-market currencies traded little changed at 93.3445, according to data compiled by Bloomberg.

The October output numbers still don’t mean the central bank will cut interest rates sooner than the first quarter of the next year, according to VTB Capital’s Kolychev. Bank Rossii kept its main lending rate unchanged in November after a surprise acceleration in inflation.

“The central bank is likely to take comfort in the fact that there was no huge negative surprise,” Kolychev said in an e-mailed note.

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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