Ruble Rebounds From 7 1/2-Month Low on Taxes, Reserve Jump

The ruble rebounded from a 7 1/2-month low against the euro as companies converted foreign currency earnings to pay taxes and reserves hit an almost two-year high.

The currency gained 0.2 percent to 41.4141 per euro by the 5 p.m. close in Moscow, after sliding to 41.6610 earlier today, the weakest since Feb. 10. It was little changed at 31.0250 per dollar, after strengthening to as high as 30.8350, the most for a week.

Russian companies have to pay a total of 531 billion rubles ($17 billion) of pension, value-added, production and profit taxes by the end of September, according to estimates by Moscow-based Alfa Bank, Russia’s largest private lender. The nation’s foreign-currency reserves, the world’s third-largest stockpile, surged to $481. 3 billion last week, a central bank report today showed. The increase, spurred traders to “jump” and buy ruble, said Clemens Grafe, chief economist in Moscow at UBS AG.

“Some exporters are dollar-selling ahead of natural resources taxes” due by the end of the month, Denis Korshilov, head of foreign-exchange trading in Moscow at Citigroup Inc., said in an e-mail interview today.

Bank Rossii, Russia’s central bank, buys and sells foreign currency to limit swings in the ruble that hurt exporters. It manages the currency against a dollar-euro basket and has been targeting a corridor of 33.40 to 36.40 versus the basket since April, First Deputy Chairman Alexei Ulyukayev said in June. The ruble snapped a three-day drop versus the basket today, strengthening 0.1 percent to 35.7000.

‘Fresh’ Long Positions

Traders expect Bank Rossii to double the amount it sells to at least $300 million a day to support the ruble when it weakens to 35.75, he said. Within the corridor, the central bank sells foreign currency once the ruble trades between 35.40 and 36.40, Korshilov said. The ruble closed at 35.7460 versus the basket yesterday.

This expectation is “driving local speculators to open fresh long ruble positions,” Korshilov added, referring to bets placed by traders when they expect a security to strengthen.

Investors reduced bets that the ruble will weaken, with non-deliverable forwards showing the currency at 31.2607 per dollar in three months, compared with 31.2238 yesterday. The contracts, known as NDFs, are a way of gauging the likely direction of currencies as they allow companies to hedge against exchange-rate fluctuations and foreign investors to speculate on currencies of countries that limit their participation.

Options traders held bets that the ruble will depreciate against the dollar, with the currency’s one-week risk-reversal rate -- the premium of put options over calls -- steady at 2 percent today, from 1 percent on Sept. 14.

Russian dollar-bonds due 2010 rose, pushing the yield 9 basis points lower to 4.57 percent, the lowest since Aug. 23. The yield on ruble-denominated government bonds due November 2014, known as OFZs, was unchanged at 6.85 percent for a second day.

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