Russia’s central bank is boosting interventions to support the ruble, according to VTB Capital, as Europe’s worsening debt crisis drives the currency to its weakest level in three years.
The ruble lost 2.2 percent to 33.48 per dollar by the close in Moscow, extending its monthly drop to 12 percent, the most of 25 emerging-market currencies tracked by Bloomberg and sharpest drop since January 2009. The currency tumbled 2.1 percent to 37.0543 against the central bank’s target euro-dollar basket, which Bank Rossii uses to limit swings that erode exporters’ competitiveness.
Russia’s central bank boosted its daily foreign currency sales to as much as $200 million today after the ruble depreciated beyond 36.5 against the basket, according to VTB. Crude oil, Russia’s main export earner, extended its worst monthly fall since 2008 amid concern Greece will exit the euro and Spain’s finances will deteriorate further.
“They’re selling less than the market anticipated,” Dmitry Sinitsyn, head of foreign exchange in Moscow at Credit Suisse Group AG, said by e-mail. The size of interventions are a “surprise for ruble lovers,” he said.
Bank Rossii drained more than $200 billion of its international reserves managing a 35 percent devaluation of the ruble in the six months through January 2009 after the collapse of Lehman Brothers Holdings Inc. hobbled commodity prices.
Russia’s international currency and gold reserves dropped by $1.1 billion in the week ended May 25 to $513.2 billion, the lowest level in two months, central bank data showed today.
“The absence of official rhetoric on the foreign-exchange moves gives the impression the central bank is abstaining from the market, and actually encourages this move” in the ruble, Andrey Volkov, head of foreign exchange and money markets at ZAO Natexis Bank in Moscow, said by e-mail. “We need to see them. The Europe problem still persists.”
The ruble extended declines after first-time claims for U.S. jobless benefits grew by 10,000 to 383,000 last week, topping the median estimate of 370,000 in a Bloomberg survey of economists. A separate U.S. report showed the economy expanded at a 1.9 percent annual rate in the first quarter, down from a 2.2 percent prior estimate, and growth in personal consumption trailed forecasts.
‘End in Tears’
Russia’s ruble-denominated Eurobond due 2018 fell for a second day, lifting the yield six basis points to 7.344 percent, the highest since Jan. 13. The country’s $3.5 billion of notes due July 2018 fell, increasing the yield by one basis point, or 0.01 percentage point, to 3.861 percent.
In the first quarter Bank Rossii bought larger amounts of dollars daily to weaken the ruble as it appreciated than it is selling now to strengthen the currency, Credit Suisse’s Sinitsyn said.
The ruble’s sharp depreciation this month may be followed by a correction over the next two to three weeks of as much as 3.7 percent to 32.3 per dollar, according to Peter Neimyshev, head of foreign exchange at Otkritie Bank in Moscow.
“We look at oil prices, and strongly believe that the $99 to $100 level for Brent should hold,” he said by e-mail. Brent crude traded down 1.9 percent at $101.50 in London.
Investors increased bets on the currency weakening, with non-deliverable forwards showing the ruble at 34.079 per dollar in three months, compared with expectations of 33.4998 per dollar yesterday.
“A hard ruble policy could end in tears,” Tim Ash, head of emerging-markets research at Royal Bank of Scotland Group Plc in London, wrote in an e-mailed note to clients. “They are looking at their peers, and allowing the ruble to go with the flow, to take some heat out of the system. The central bank is worried about the global story and mindful of their experience from 2008 and 2009.”