The ruble weakened against the euro for the first time in eight days, ending its longest rally in more than a year, on speculation Europe will act to contain its debt crisis and as demand ebbed for local currency to pay taxes.
Russia’s currency slid 0.7 percent to 41.28 per euro by the 5 p.m. close of trading in Moscow, ending the longest run of gains since October 2009. It also weakened against the target dollar-euro basket used by the central bank to manage ruble swings, dropping 0.2 percent to 35.8625.
The euro appreciated against most of the 25 emerging-market currencies tracked by Bloomberg after European Central Bank President Jean-Claude Trichet said investors are underestimating the determination of policy makers to shore up the shared currency. Russian companies had to pay 219 billion rubles ($7 billion) of profit and production taxes to the government in the past week, with the last payment due on Nov. 29, according to estimates by Moscow-based Alfa Bank.
“The tax payment period is over so less export proceeds are being sold onto the market,” said Denis Korshilov, head of foreign exchange trading in Moscow at Citigroup Inc. The improvement in European sentiment and the prospect of Russian development bank VEB buying a stake in monopoly gas exporter OAO Gazprom is also “slightly negative for the ruble,” he said.
German company E.ON AG has sold its 3.5 percent stake in Gazprom to VEB, E.ON said in an e-mailed statement today. The acquisition may require VEB to source foreign currency, suppressing the ruble, according to Korshilov.
Bank Rossii has managed the ruble against the basket, which is made up of about 55 percent dollars and the rest euros, since 2005. The bank buys and sells foreign currency to keep the ruble within a so-called floating corridor, which it shifts by 5 kopeks when interventions reach $650 million.
The ruble gained 0.3 percent to 31.43 per dollar today.
The corridor currently spans 33 to 37 rubles versus the basket, First Deputy Chairman Alexei Ulyukayev said in London today, according to comments confirmed by the central bank’s press service. It was 32.8 to 36.8 on Oct. 13, after Bank Rossii widened the band to four rubles from three, Ulyukayev said in a Nov. 24 interview. The regulator won’t be publicizing the corridor’s parameters “on a daily basis,” a bank spokesman who declined to be identified according to bank policy, said by phone in Moscow today.
Suppressing the Currency
Bank Rossii is currently selling about $150 million each day, Citigroup’s Korshilov said. The maximum amount of interventions the central bank undertakes each month is $6 billion, Interfax cited Ulyukayev as saying today.
Policy makers will continue to liberalize the exchange rate by widening the corridor and by changing the amount of currency that needs to be bought or sold before the range is shifted, Ulyukayev said in an interview in London today. Bank Rossii won’t take “any radical steps” to cut interventions, he added.
The ruble is “undervalued” compared with the currencies of other commodity producing nations and will appreciate next year as Russia’s current-account surplus rises to about $50 billion, Sergei Shvetsov, head of financial operations at Bank Rossii, said on a conference call for investors on the nation’s proposed ruble-denominated Eurobond issue.
Capital outflows of $22 billion this year will be followed by net inflows of about $10 billion in 2011, Shvetsov said.
There is a low amount of rubles on the Russian market after the tax-payment period and this is also suppressing the currency, said Maxim Oreshkin, chief strategist on Russia and the former Soviet Union at Credit Agricole CIB in Moscow.
The amount of rubles held by Russian lenders in deposit accounts with the central bank slid to 140 billion rubles on Nov. 29, the lowest since September 2009, according to Bank Rossii data. Russia’s Ruonia, the average interest rate 31 banks charge to lend local currency to each other, reached 4.43 percent yesterday, the highest since March 30.
Should the reduction in liquidity continue the central bank may become concerned, Ulyukayev said in the interview.
Russia’s dollar bonds due 2020 ended a seven-day losing streak, with the yield down 19 basis points to 4.94 percent. The yield on government ruble bonds maturing 2016 fell 1 basis point to 7.39 percent.