The ruble dropped to the lowest intraday level in more than two years against the dollar as oil fell and Prime Minister Vladimir Putin’s plan to return to the Russian presidency stoked concern of a government reshuffle.
Russia’s currency lost 1.2 percent to 32.42 per dollar at the 7 p.m. close in Moscow, its lowest closing level since August 2009. The ruble was 0.8 percent weaker at 43.68 per euro, leaving it down 1 percent at 37.487 against the central bank’s target dollar-euro basket, the 12th consecutive trading day of losses.
Urals crude oil, Russia’s chief export earner, lost 2 percent to $103.48 a barrel on concern Europe’s debt crisis may hurt demand for the commodity in the euro area. Putin’s announcement Sept. 24 prompted Finance Minister Alexei Kudrin to say he probably wouldn’t continue in his current role if current President Dmitry Medvedev becomes prime minister in the new government. Medvedev signed an order dismissing Kudrin, Natalya Timakova, the president’s spokeswoman, said today after official ruble trading ended in Moscow.
“For the ruble, we think the tandem has probably chosen the worst possible moment to unveil its plans,” Tatiana Orlova, an economist covering Russia and the former Soviet Union at Nomura International in London, wrote in an e-mailed research note before the dismissal was announcement.
Investors increased bets that the ruble will weaken, with non-deliverable forwards showed it at 33.0592 per dollar in three months at 8:10 p.m. in Moscow, compared with 32.9975 before the announcement. They closed at 32.6685 on Sept. 23. The contracts provide a guide to expectations of currency movements and interest-rate differentials, and allow companies to hedge against currency shifts.
“Kudrin’s departure will be a body blow to the market,” Tim Ash, the London-based head of emerging-markets stategy at Royal Bank of Scotland Group Plc, said by e-mail after the market closed. “He will be very difficult to replace.”
Russia’s central bank may have sold as much as $1.2 billion of its reserves this morning to counter the ruble’s fall against the basket, Benoit Anne, the London-based head of global emerging-market strategy at Societe Generale SA, said by e-mail. Total interventions by Bank Rossii on Friday may have reached $2 billion, he said.
Bank Rossii uses the basket to smooth currency movements that can hurt exporters, selling more dollars and euros the closer the ruble gets to the weaker end of its so-called floating corridor.
The central bank’s band for the ruble may have shifted up to 32.50 to 37.50 after today’s retreat breached the upper limit of the previous corridor of 32.30 to 37.30, according to Anne. The bank is keeping its ruble policy unchanged, RIA Novosti reported Sept. 23, citing deputy central bank chairman Sergey Shvetsov.
A spokesman for the central bank declined to comment on intervention levels or corridor policy on Sept. 21 when e-mailed by Bloomberg.
“The central bank has enough reserves to stabilize the ruble,” German Gref, chief executive officer of OAO Sberbank, said at a news briefing in Singapore today. Sberbank is Russia’s largest bank.
Bank Rossii’s sales of foreign currencies to buoy the ruble may be driving up yields for ruble bonds, according to Denis Korshilov, the Moscow-based head of fixed income, currencies and commodities at Citigroup Inc. The yield on domestic OFZ bonds due 2018 jumped 12 basis points today, to a record-high 9.01 percent.
“The central bank keeps selling dollars, so there is a fear that process will keep reducing ruble liquidity,” Korshilov said by e-mail. “That, of course, pushes OFZ prices down.”
The three-month MosPrime rate, the average that banks charge to lend to each other, jumped 62 basis points to 6.45 percent today. That’s the highest since January 2010, according to data compiled by Bloomberg, a sign the amount of cash in the market is falling.