Ruble Options Show Rally to End as Central Bank Starts Purchases

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The chances of the ruble adding to this year’s world-beating gains have declined since Russia’s central bank said it would start buying foreign currency, options data show.

There’s a 39 percent chance the currency will rise below 49 against the dollar by June 30, compared with a 44 percent chance on Wednesday, the day before the Bank of Russia announcement, options data compiled by Bloomberg show. The ruble advanced 1.1 percent Friday after Thursday’s 1.7 percent tumble as the bank said it would buy $100 million to $200 million a day to replenish reserves after last year’s plunge.

The ruble is the best performer globally this year, buoyed by a cease-fire in eastern Ukraine and a rebound in the price of oil. While that appreciation has enabled Russia to slow inflation and reverse some emergency interest-rate increases, it’s also cut the revenue earned from crude and other exports.

“Without further sharp growth in the oil price, the ruble will really struggle to strengthen from the current level,” Yury Tulinov, the head of research at PAO Rosbank in Moscow, said by e-mail. “The central bank’s real aim behind this move was not to let the ruble strengthen beyond its fair value.”

The ruble gained to 49.6040 per dollar by 6:52 p.m. in Moscow. The central bank bought $181 million in the market on Wednesday, according to its website statement on Friday. Brent crude traded 0.4 percent lower at $66.33 a barrel.

Signal to Market

The bank will make the purchases smoothly during the trading day to minimize the impact on the exchange rate and isn’t intending to support a particular exchange rate, according to a statement Thursday. It’s the first time the Bank of Russia has sold rubles since June.

The country spent about $88 billion of reserves on interventions last year to stem the ruble’s worst decline since a 1998 debt default. It decided in November to allow the currency to trade freely to conserve reserves, which tumbled in April to as low as $351 billion, the least since at least January 2008.

“The central bank is signaling that the ruble needs to weaken,” Artem Roschin, a foreign-exchange dealer at Aljba Alliance bank, said by phone. “While $100 to $200 million is a small amount on a daily basis, it adds up to a lot over the week and we might see a stronger effect on the ruble in two to three weeks.”

The Micex Index advanced 0.8 percent to 1,691.46, led by VTB Group, OAO Gazprom and OAO Surgutneftegas. VTB rose 5 percent after its board recommended paying 0.00117 rubles a share in dividends. Surgutneftegas jumped 2.7 percent and its preferred shares climbed 2.9 percent. The oil producer’s board recommended paying a dividend of 0.65 rubles per common share and 8.21 rubles per preferred share.

Qiwi Plc jumped 4.6 percent after first-quarter earnings of 20.29 rubles per share, published on Thursday, beat the average analyst estimate of 16.72 rubles.

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