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Ruble Weakens for Seventh Month Amid ‘Toxic’ Currency Risks

Aug. 30 (Bloomberg) -- The ruble sank for a seventh month as investors pulled funds from developing-nation assets amid prospects of U.S. stimulus cuts and slower growth.

The ruble weakened 0.1 percent against the dollar to 33.2835, a drop of 0.9 percent in the month and the longest stretch of monthly decreases since February 2009. The ruble was little changed at 38.0960 versus the central bank’s euro-dollar basket by 6 p.m. in Moscow, when the central bank stops its market operations.

Russia-dedicated bond funds lost $181 million in the five days to Aug. 28, their 14th week of outflows, OAO Gazprombank said today, citing EPFR Global data. The U.S. Federal Reserve will begin to slow its debt purchases at a Sept. 17-18 meeting, according to 65 percent of economists in a Bloomberg survey conducted this month. Russia’s current-account surplus decreased to $6.9 billion in the second quarter from $25.1 billion in the first quarter. Brent oil fell 0.2 percent to $114.94 a barrel.

The ruble has weakened due to “a toxic combination of risks related to policy tightening in the U.S., a slowdown in China and domestic reasons, mostly related to the structural deterioration in the balance of payments,” Vladimir Kolychev, an economist and strategist at OAO Rosbank in Moscow, said in e-mailed comments.

The Economy Ministry forecasts the current-account surplus in 2013 will decline to $26 billion from $75 billion in 2012. The ruble strengthened 0.1 percent versus the euro to 43.9780. The yield on the government’s ruble debt due February 2027 fell four basis points, or 0.04 percentage point, to 8.01 percent.

Possible Outperformance

“The same combination of external risks is likely to prevail in September, but on the domestic front seasonal demand for hard currency has likely peaked in August,” Kolychev said. “Hence, the ruble may outperform broader emerging-market peers, but is clearly not immune to another wave of the sell-off in emerging currencies.”

Bank Rossii raised its currency corridor 5 kopeks as of Aug. 29, the regulator said today on its website. That’s the sixth five-kopek shift in August. The central bank raises or lowers the trading band against the basket as soon as accumulated interventions reach $450 million.

Russia’s central bank sold 13.28 billion rubles ($399 million) of foreign currency on Aug. 28, bringing the total spent since May 29 to almost 446 billion rubles.

The ruble is the best-positioned currency in the eastern Europe, Middle East and Africa region for a recovery rally before the end of the year, David Hauner, head of EEMEA economy and fixed income and foreign exchange strategy at Bank of America Corp., said in an e-mailed note.

“This is first because of the commodities angle, but also because of the insulation by the current account surplus,” Hauner said.

To contact the reporter on this story: Vladimir Kuznetsov in Moscow at vkuznetsov2@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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