Ruble Drops to Five-Year Low on China as UBS Sees More Weakness

The ruble weakened to the lowest level in almost five years after an index of manufacturing in China trailed estimates and UBS AG predicted further declines.

Russia’s currency lost 0.5 percent to 34.0900 against the dollar at 6 p.m. in Moscow, the lowest on a closing basis since April 2009. The yield on ruble-denominated OFZ bonds due February 2027 rose five basis points, or 0.05 percentage point, to 8.15 percent, the highest level since June.

A private report today showed China’s manufacturing in January may contract for the first time in six months, curbing investors’ appetite for higher-yielding assets. An index of 20 most actively traded emerging-market currencies fell for a ninth day, declining 0.2 percent to 90.27, the lowest level since April 2009.

A “large” part of the ruble’s weakness is because of a global selloff, Vladimir Osakovskiy, an economist for Russia at Bank of America Corp., said in e-mailed comments from Moscow.

The ruble depreciated 0.9 percent against Bank Rossii’s target basket of dollars and euros to 39.7094, surpassing the 39.45 threshold where the central bank doubles its sale of foreign currency to $400 million per day.

Russia’s currency will probably fall a further 3.5 percent against the basket by the end of the year as the nation’s current account remains on a “downward trajectory,” according to UBS.

Downward Trajectory

“We have been warning of structural depreciation pressures on the ruble since last August, and remain bearish on the currency despite the recent sell-off,” London-based UBS analysts Anna Zadornova and Manik Narain said in an e-mailed note.

The ruble has lost 3.7 percent against the dollar this year, the fifth-worst performance among 24 emerging-market currencies monitored by Bloomberg.

The preliminary reading of 49.6 for January in a China Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with a final figure of 50.5 in December and a 50.3 median estimate of 19 analysts in a Bloomberg News survey. A number below 50 indicates contraction.

Crude oil, Russia’s main export earner, declined 0.4 percent in London to $107.86 per barrel, falling for the first time in three days.

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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