The ruble slid to a five-year low as investors wagered Bank Rossii accepts the weakness as it transitions to a free-floating currency this year.
The ruble dropped 0.6 percent to 39.1644 against Bank Rossii’s target basket of dollars and euros by 6 p.m. in Moscow, when the central bank stops its trading operations. That’s the weakest since March 2009 on a closing basis.
Central bank stress tests show Russian lenders can withstand 25 percent to 30 percent ruble volatility, the Wall Street Journal said, citing Bank Rossii First Deputy Chairman Ksenia Yudaeva. Optimism a forecast $16 billion current-account surplus in the first quarter will bolster the local currency is “falling fast,” Goldman Sachs Group Inc. analysts Clemens Grafe and Andrew Matheny said in an e-mailed note.
“Yudaeva’s comments were taken as another implicit confirmation that the central bank doesn’t mind a weaker ruble,” Dmitry Dorofeev, a strategist at BCS Financial Group, said in e-mailed comments.
Companies convert foreign-currency earnings to pay 590 billion rubles ($17.5 billion) to 660 billion rubles of taxes this month, according to OAO Promsvyazbank analyst Alexei Egorov. Mineral extraction tax, the main duty for exporters, is paid Jan. 31.
Russia’s current-account surplus narrowed 55 percent year-on-year to $4.7 billion in the fourth quarter, missing a $5 billion estimate, central bank data showed on Jan. 16. Russian non-energy exports continued to slow, deepening the dependence on energy exports for the Russian economy, Morgan Stanley analysts said, citing the data.
The ruble will probably decline further given the central bank’s “reduced resistance” to weakness, Morgan Stanley’s Rashique Rahman said in an e-mailed note on Jan. 17.
The central bank is reducing currency market interventions aimed at slowing the ruble’s fall as the regulator accelerates its transition to targeting inflation. The central bank raised the exchange rate band it targets for interventions against the basket by 5 kopeks on Jan. 17 to 33.30 to 40.30, according to a statement on the official website. That’s the fifth shift since the beginning of the year, the data show.
The ruble is approaching equilibrium, Yudaeva said at a conference in Moscow on Jan. 15. The currency’s 1.4 percent selloff against the basket since the beginning of the year has brought it in line with Russia’s fundamentals, Ivan Tchakarov, economist for Russia at Citigroup Inc. in Moscow., said in an e-mailed note today.
The ruble will fall a further 4 percent to 5 percent, which will be a “boon to the struggling Russian economy at this cyclical juncture,” Tchakarov said.
The economy expanded 1.2 percent in the third quarter from a year earlier, matching the pace of the previous three months. Crude oil, Russia’s main export earner, traded little changed at $106.49 in London, while an index of 20 emerging-market currencies against the U.S. dollar declined 0.1 percent to 90.79.
The ruble weakened 0.6 percent versus the euro to 45.7700 and declined 0.5 percent against the dollar to 33.7625, the lowest level in five years. The yield on Russia’s ruble-denominated OFZ bonds due February 2027 increased for a fifth day, rising three basis points to 8.1 percent, the highest since June 25.