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Ruble Drops Versus Dollar as Nabiullina Picked for Central Bank

The ruble fell against the dollar after President Vladimir Putin nominated Elvira Nabiullina to head the Central Bank and Goldman Sachs Group Inc. cut its forecast.

The Russian currency declined 0.3 percent against the dollar to 30.7955, the lowest level since Dec. 21, by 7 p.m. in Moscow. The ruble strengthened 0.4 percent against the euro, leaving it up less than 0.1 percent against Bank Rossii’s dollar-euro basket at 34.8704.

Putin nominated Nabiullina, a former economy minister, to take over from Bank Rossii Chairman Sergey Ignatiev, who retires June 23 when his third and final term ends. Her appointment may lead to a weaker ruble as the market prices in an increased chance of monetary easing, reducing the currency’s appeal as a so-called carry-trade, VTB Capital and Bank of America Merrill Lynch analysts said.

“We see it as negative for the ruble and supportive for our outlook for 75 basis points of rate cuts this year,” Vladimir Osakovskiy, chief economist at Bank of America Merrill Lynch, said by e-mail. “She will most likely have a much greater pro-growth bias as former economy minister.”

Goldman Sachs economists Clemens Grafe and Andrew Matheny cut their ruble forecast for the next three and six months to 34.50 rubles and 35 rubles versus the basket from 33 rubles and 33.50 rubles.


Seasonal factors such as the current account surplus are weakening, and short-term “upside would require acceleration of domestic demand” they wrote in a note to clients.

Implied interest rates on six-month non-deliverable forward contracts for dollars declined four basis points to 6.28 percent.

The initial negative market reaction will be short-lived, according to VTB Capital chief economist Maxim Oreshkin, who recommended investors buy into the weakness. “We do not expect strong front-loaded rate cuts in the coming months,” he said in a note to clients.

Yields on benchmark OFZ bonds due February 2027 increased one basis point, or 0.01 percentage points, to 7.37 percent. The Finance Ministry sold only 22 percent of the notes due July 2022 that it offered at an auction today, placing 1.98 billion rubles at 6.87 percent.

“This clearly reveals the market is extremely weak and unwilling to take extra positions in OFZs both via auctions and the secondary market,” ING Groep NV’s analyst Dmitry Polevoy said in a note to clients.

The ministry also sold 4.21 billion rubles of five-year bonds at 6.22 percent. The size of the offering was cut from an initial 20 billion rubles.

There is substantial demand from foreign investors awaiting a more favorable entry point into the market, Alexey Korolenko, a fixed-income money manager at Uralsib Financial Corp., said.

“If not today, then tomorrow or the day after the money will become easier,” Korolenko said by phone.

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