Ruble Falls to Dollar After Greek Deal; Bond Yields Drop

The ruble weakened for the first time in three days against the dollar and bonds declined amid concern a bailout secured by Greece won’t be enough to solve the nation’s debt crisis.

The Russian currency depreciated as much as 0.3 percent, before paring declines to close less than 0.1 percent weaker at 29.8125 per dollar at 7 p.m. in Moscow, its first retreat since Feb. 16. The yield on Russia’s 114 billion rubles ($3.8 billion) of OFZ bonds due 2021 rose for a second day, climbing three basis points, or 0.03 percentage point, to 7.92 percent.

European finance ministers awarded Greece 130 billion euros ($173 billion) in aid and persuaded investor representatives into providing more debt relief in an exchange offer meant to tide Greece past a bond redemption next month. The European Union is Russia’s largest trading partner.

“People got short on the basket against the ruble before the actual decision” on Greece, Mikhail Palei, a currency trader at VTB Capital in London, said by e-mail. “There was a lot priced in. We may be in a ‘buy the rumor, sell the fact’ type of thing.”

The ruble was little changed at 34.1417 against the central bank’s target dollar-euro basket after gaining 0.7 percent in the previous two sessions. The Russian currency was steady at 39.43 per euro.

“We recommend positioning for ruble weakness via a long EUR-RUB position,” HSBC Holdings Plc analysts Murat Toprak and Alexander Morozov wrote in an e-mailed note to clients. “Our macro metrics suggest that the ruble is one of the most expensive currencies within the Europe, Middle East and Africa region.”

Relative Valuation

The ruble has rallied 5.9 percent against the euro in 2012, after losing 8.6 percent last year. The Czech koruna has gained 4.4 percent against the European currency this year, and South Africa’s rand strengthened 4.6 percent.

Oil, Russia’s chief export earner, traded at $104.37 per barrel in New York futures trading, down 0.6 percent from its level at yesterday’s 7 p.m. close in Moscow. Investors increased bets that the ruble will weaken, with non-deliverable forwards showing it at 30.1623 per dollar in three months, compared with expectations of 30.149 per dollar yesterday.

The ruble has strengthened 1.2 percent against the dollar this month, after appreciating 6.5 percent last month. Brazil’s real has gained 2.1 percent against the greenback in February, India’s rupee strengthened 0.7 percent and China’s yuan rose 0.2 percent.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps fell two basis points to 208 basis points, down from last year’s peak of 338 on Oct. 4, according to data provider CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

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