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Ruble Drops Before Russia Reacts to East Ukraine Secession Votes

May 12 (Bloomberg) -- The ruble weakened after rallying the most in 20 months last week on speculation Russia will face wider sanctions if it supports secession votes by separatist groups in eastern Ukraine.

The currency fell 0.1 percent to 41.1685 against the central bank’s target dollar-euro basket by 11:12 a.m. in Moscow, following a 2.3 percent advance in the five days through May 11. Yields on ruble-denominated debt due in February 2027 decreased one basis point to 9.09 percent, the lowest level in three weeks on a closing basis.

Investors are awaiting President Vladimir Putin’s response to the Donetsk and Luhansk votes that were dismissed as illegitimate by the government in Kiev and its U.S. and European allies. Putin, who last week urged separatists not to hold the plebiscites, will decide his position later, Kremlin press secretary Dmitry Peskov said in an interview with Kommersant published today. Ninety percent of voters in Donetsk backed the breakaway plan, RIA Novosti reported late yesterday.

“An active support of the referendum results by Russia will mean new sanctions,” OAO Promsvyazbank analysts Dmitriy Gritskevich and Alexei Egorov said in an e-mailed note.

The ruble depreciated 0.4 percent to 35.1760 versus the dollar and traded 0.1 percent stronger at 48.4705 per euro. Russia’s currency has retreated 6.6 percent per dollar this year, the second-worst performance among 24 emerging-market currencies tracked by Bloomberg.

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

To contact the editors responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net Daliah Merzaban, Alex Nicholson

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