Ruble Falls Sixth Day on Bank Rossii Purchase Bets, Europe Data

The ruble weakened for a sixth day amid speculation the central bank was buying foreign currency to stem its appreciation and after European data signaled slowing growth, curbing appetite for riskier assets.

The Russian currency lost 1 percent to 29.635 per dollar at the close in Moscow, the biggest daily drop since Feb. 10, and extended the longest streak of declines since December. The ruble slipped 0.2 percent to 38.87 per euro and retreated 0.6 percent to 33.7907 against the central bank’s target dollar-euro basket.

Gross domestic product in the 17-nation euro area dropped 0.3 percent in the fourth quarter from the third, European Union figures showed today. Bank Rossii may be buying as much as $250 million a day to slow the ruble’s 7.9 percent appreciation against the basket in 2012, according to Andrey Volkov, head of foreign exchange and money markets at ZAO Natixis Bank in Moscow.

“With the elections behind us, people are taking profits before the long weekend in Russia this week,” he said by e-mail. “We’ve come dangerously close to the lower boundary of the basket where players expect more active participation of the central bank buying the basket and increasing the size of its interventions.”

Russia’s markets will be closed March 8 and 9 for a public holiday. Prime Minister Vladimir Putin won his bid to return to the Kremlin in the presidential election March 4.

Floating Corridor

Bank Rossii manages the ruble within a so-called “floating corridor” against a basket of dollars and euros to limit swings that erode exporters’ competitiveness. A level of 33.50 to 33.70 against the basket indicated the bank may be buying $200 million to $250 million per day in other currencies against the ruble, Volkov said.

Russia’s $2 billion of bonds due 2015 rose for the first time in three days, pushing the yield down three basis points, or 0.03 percentage point, to 2.301 percent. The yield on dollar-denominated debt due the same year issued by OAO Sberbank, Russia’s biggest lender, jumped 11 basis points to 3.563 percent, while the yield on similar-maturity notes from state gas monopoly OAO Gazprom fell three basis points to 3.363 percent.

“In credit, we recently increased our overweight on Russia due to elevated oil prices,” Morgan Stanley analysts led by James Lord in London wrote in an e-mailed note to clients dated yesterday. “We tend to favour Gazprom’s bonds to implement our bullish strategy in credit, in particular Gazprom 2019.”

Real, Rupee, Yuan

Investors increased bets on the ruble depreciating, with non-deliverable forwards showing the currency at 29.9877 per dollar in three months, compared with expectations of 29.6838 per dollar yesterday. The Russian currency has appreciated 8.5 percent against the dollar in 2012, while Brazil’s real rose 5.9 percent, India’s rupee strengthened 5.3 percent and China’s yuan lost 0.2 percent.

The cost of protecting Russian debt against non-payment for five years using credit-default swaps rose nine basis points to 192 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.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE