Ruble Pares Quarterly Gain on U.S. Business Activity Contraction

The ruble weakened, erasing earlier gains, after business activity in the U.S. unexpectedly contracted and demand for the local currency waned following this week’s tax payments.

The ruble depreciated 0.3 percent to 31.1875 per dollar by 7 p.m. in Moscow, paring the quarterly advance to 3.8 percent. It gained as much as 1.2 percent in earlier trading. The Russian currency lost 0.4 percent against the euro to 40.1150 as well as the central bank’s euro-dollar basket to 35.2049.

Business activity shrank in September for the first time in three years, adding to signs manufacturing will contribute less to the U.S. economic recovery. Russian companies paid off the last in a series of month-end taxes today.

“Things were holding up okay, then data came out of the U.S. which seemed to cause things to turn around a bit,” Michael Workman, the head of fixed-income at Otkritie Capital in Moscow, said in an e-mail today.

The Institute for Supply Management-Chicago Inc. said today its business barometer fell 49.7 this month from 53 in August. A reading of 50 is the dividing line between expansion and contraction.

Non-deliverable forwards showed the ruble at 31.7492 per dollar in three months compared to 31.4700 yesterday.

The extra yield investors demand to own Russia’s dollar bonds over U.S. Treasuries fell seven basis points to 210, according to JPMorgan Chase & Co.’s EMBI Global Index. An index of five-year government bond yields compiled by the Micex fell two basis points to 7.604 percent.

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