The ruble weakened for the first time in three days on concern the European Union is set to announce tougher sanctions on Russian companies and banks.
The currency retreated 0.4 percent to 35.0505 per dollar by 6 p.m. in Moscow, when the central bank stops its market operations. The yield on government bonds due February 2027 rose six basis points to 9.14 percent, snapping a 15 basis-point decline in the previous two days.
A ban on European purchases of bonds or shares sold by Russia’s state-owned banks is among the options for stepped-up sanctions being weighed by the European Union over the Kremlin’s actions in Ukraine, according to a proposal presented to member states.
“Only the EU’s rejection of harder sanctions can stop this fall,” Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow, said in e-mailed comments.
The ruble fell 0.6 percent to 47.2035 against the euro and weakened 0.5 percent versus the central bank’s target basket of dollars and euros to 40.5191.
“Whether European governments will have the unity to implement such aggressive sanctions remains to be seen,” Morgan Stanley analysts, led by Rashique Rahman, said in an e-mailed note. “But given the recent recovery in the ruble earlier this week, we continue to see risk/reward on the ruble as skewed toward weakness.”
The currency is down 6.3 percent against the dollar since the start of the year, the worst performance among 14 developing-market currencies in Europe.
The central bank will leave the benchmark one-week auction rate unchanged at a meeting tomorrow at 7.5 percent, according to all but one of the 23 economists surveyed by Bloomberg. One analyst predicts a quarter-point cut. The bank will announce the decision tomorrow at about 1:30 p.m.
Any indication of the central bank’s readiness to act “may help the ruble at the margin,” the Morgan Stanley analysts said. Morgan Stanley forecasts no change to the rate tomorrow.
“They have both the tools and capability to protect the currency thorough a combination of interventions and policy rate hikes, should market moves become disorderly,” they said.