The ruble sank against the dollar in late Moscow trading as crude, Russia’s biggest export earner, retreated from a four-month high.
The Russian currency weakened 0.3 percent to 30.3475 per dollar by the 11:50 p.m. close of trading on the Micex Index, after earlier gaining as much as 0.3 percent. It rallied 0.4 percent to 40.2975 per euro, leading the ruble little changed at 34.8250 versus the dollar-euro basket used by the central bank to manage the currency. An index of five-year government yields rose less than one basis point to 6.2893 percent.
Oil, which along with natural gas contributes about 50 percent of Russian government revenue, slipped 0.9 percent to $93.28 a barrel in New York, after soaring to the highest level since Sept. 18 yesterday. U.S. President Barack Obama said that the world’s biggest economy will face fiscal calamity if the $16.4 trillion debt ceiling isn’t lifted. Republicans are demanding spending cuts in exchange for the higher threshold.
Russia’s central bank left key borrowing costs unchanged in a review today, holding the refinancing rate at 8.25 percent for a fourth month as forecast by all 19 economists in a Bloomberg survey.
Bank Rossii said today that it bought 190 million rubles ($6.3 million) of foreign currency for settlement Jan. 14, compared with 5.15 billion rubles Jan. 11.
Keeping rates on hold makes the ruble “more attractive” as a so-called carry trade currency as policy makers from Poland to Israel lower borrowing costs to stoke economic growth, according to Ivan Sinelnikov, an analyst for OAO Gazprombank. In carry trades, investors borrow funds in countries with lower interest rates to invest where the rates of return are higher.
“The central bank may spend a little today to buy currencies,” Sinelnikov said by phone from Moscow. With the ruble trading weaker than 34.65 against the basket it has entered a “neutral corridor,” he said.
Investing in the ruble with funds borrowed in the U.S. generated a 2 percent return since Dec. 14, the fourth-highest return among 24 emerging-market currencies tracked by Bloomberg.
Yields on Russia’s ruble-denominated government debt due in July 2022 rose 7 basis points, or 0.07 percentage point, to 6.72 percent, the highest level since Jan. 9. The extra yield investors demand to own Russian dollar bonds over U.S. Treasuries was unchanged at 159 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index.