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Ruble Drops Third Day on Fed Concern as VTB Sees Slide Overdone

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Nov. 12 (Bloomberg) -- The ruble and Russian government debt declined for a third day on concern the Federal Reserve will move to curb stimulus. VTB Capital said the drop is overdone and currency may rebound.

The ruble slid 0.2 percent to 37.9186 against Bank Rossii’s target dollar-euro basket by 6 p.m. in Moscow, the weakest level on a closing basis since Sept. 9. The yield on government bonds due February 2027 rose three basis points, or 0.03 percentage point, to 7.82 percent.

“We’re still reeling along with other emerging countries on the tapering expectations,” Anton Nikitin, an analyst at VTB Capital in Moscow, said in e-mailed comments. “We’re closer to levels where we see very good opportunities” to bet the ruble will strengthen, he said.

Emerging-market currencies weakened as investors weighed the timing for reduced bond purchases by the Fed. Policy makers will pare the monthly pace to $70 billion at their March 18-19 meeting, according to the median of 32 economist estimates in a Bloomberg survey on Nov. 8. The U.S. central bank currently buys $85 billion of debt a month.

Russia’s central bank eased its defense of the ruble, allowing the corridor in which it trades against the basket to rise by 5 kopeks to 32.45-39.45 rubles, the regulator said on its website today. The central bank buys the equivalent of $200 million of rubles per day to slow its declines at current levels and buys $400 million if it weakens to below 38.50 per basket, according to its exchange rate policy.

“We are pretty deep in the central bank’s intervention zone,” Nikitin said.

The ruble weakened 0.1 percent against the dollar to 32.8410 and traded down 0.3 percent versus the euro at 44.1260. Oil, Russia’s chief export earner, advanced 0.3 percent to $106.75 a barrel in London.

Russia’s 2027 ruble bonds fell for a third day. “Investors expectations on tapering start looking excessive, which increases the appeal of the ruble bonds,” Dmitriy Gritskevich, a money manager at OAO Promsvyazbank in Moscow, said in an e-mailed note.

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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