Ruble Has Longest Losing Streak Versus Target Basket Since 2009

The ruble weakened for a ninth day against the central bank’s target dollar-euro basket, its longest stretch of declines since February 2009, as investors pared bets on riskier assets.

The ruble depreciated 0.3 percent to 36.6914 versus the basket by the 7 p.m. close in Moscow, the lowest level since December 2009. The ruble sank 0.4 percent to 31.4725 per dollar and lost 0.3 percent to 43.07 per euro.

The ruble slumped 5 percent against the basket since Sept. 8 amid concern a possible default by Greece will hobble the economic recovery. The European debt crisis has generated as much as 300 billion euros ($410 billion) in credit risk for European banks, the International Monetary Fund said today, calling for capital injections to reassure investors and support lending.

The central bank uses the basket to smooth currency movements that can hurt exporters. The regulator sells more dollars and euros the closer the ruble gets to the weaker end of a so-called floating corridor that currently stands at 32.15 to 37.15 rubles, Ivan Tchakarov, Moscow-based chief economist at Renaissance Capital, said by e-mail yesterday.

The central bank drained more than $200 billion, or about a third of the country’s international reserves, in the six months through January 2009 to stem a 35 percent devaluation of the ruble to the dollar.

“The central bank is now selling dollars and buying rubles to lean against the wind,” Tchakarov said. “The closer the ruble-basket rate moves towards the upper end of the band, the more the bank will intervene.”

Cost of Protection

Urals crude oil, Russia’s main export blend, lost 4.8 percent to $111.60 a barrel yesterday, the biggest daily drop since Aug. 8. The blend gained 0.5 percent today, paring its loss since reaching this year’s peak of $122.88 a barrel on April 4 to 8.7 percent.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps climbed three basis points to 232 yesterday, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market. That’s the highest level since September 2009 based on closing prices, the data show.

The contracts pay the buyer face value in exchange for the underlying securities, or the cash equivalent, should a government or company fail to adhere to its debt agreements.

The ruble could recoup some of its losses if the U.S. Federal Reserve announces steps to boost the economy today, Chris Weafer, chief strategist at Troika Dialog, Russia’s oldest investment bank, wrote in an e-mailed note.

“The recent sharp decline in the ruble against both the dollar and the euro is an overreaction to oil-price fears,” he said.

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