Ruble Weakens as Tax Support Winds Down, Chinese PMI Declines

The ruble snapped three days of gains as Russia’s tax period ended and falling Chinese manufacturing pared appetite for emerging-market assets.

The ruble declined 0.4 percent against the central bank’s dollar-euro basket to 37.3930 by 1:08 p.m. in Moscow. The currency’s 6.5 percent drop against the basket in the second quarter was the largest since the three months ending June 2012, according to data compiled by Bloomberg.

The monthly tax period in Russia concluded last week. An official Purchasing Managers’ Index for China fell to the lowest level in four months, while the private PMI from HSBC Holdings Plc and Markit Economics declined to the weakest since September, underscoring a sustained slowdown in the nation’s economy.

“Dwindling export sales after the tax period and weak macroeconomic data from China dictated a weak start of today’s trading,” OAO Rosbank analysts led by Vladimir Kolychev said in an e-mailed note.

Investors are cautious ahead of the July 5 employment report from the U.S., and this may keep pressure on the ruble through the week, they said.

The central bank has spent the equivalent of 98 billion rubles ($3 billion) of foreign currency since May 29 to curb the ruble’s slide. Bank Rossii, which reports interventions with a delay and steps up purchases if the ruble weakens beyond certain levels, spent the equivalent of 6.57 billion rubles on June 27.

International Flows

Flows from international investors are turning in the ruble’s favor, while its potential decline is limited by the central bank’s purchases, VTB Capital analysts Maxim Korovin and Anton Nikitin wrote in an e-mailed note.

“The ruble could be balancing around the current levels for some time,” they said.

An index of emerging-market currencies compiled by Bloomberg appreciated 0.1 percent against the dollar. The ruble’s three-month volatility rose four basis points to 10.95 compared with this year’s high of 11.54 on June 21, data compiled by Bloomberg show.

The yield on benchmark OFZ bonds due February 2027 declined five basis points, or 0.05 percentage point, to 7.90 percent. The Finance Ministry may announce today the terms of the its OFZ auction to be held July 3. It canceled a sale last week.

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