The case for buying this year’s best-performing currency is weakening.
BlackRock Inc.’s emerging-markets chief said Thursday that he’s “taking profit” on Russian assets on expectations that the rally in oil is close to exhausted. Credit Agricole CIB is telling its clients that the government’s foreign-currency purchases are working and further ruble gains will be limited.
This year’s biggest currency rally is petering out after oil’s rebound faded and Russia’s finance ministry and central bank said this month that they started buying foreign exchange. The ruble fell for a third day on Thursday, the longest streak in a month trimming its gains in 2015 to 21 percent. Brent crude hasn’t closed above $67 a barrel since May 6.
“We were long ruble and now we have actually taken profits on our ruble position,” Sergio Trigo Paz, the head of emerging-markets fixed income at BlackRock, told reporters in London on Thursday. With oil in the high $60s per barrel, he wants to be positioned for a drop toward the $50s, he said.
The ruble’s rally has outpaced crude this year, with Brent gaining 16 percent. A stronger currency cuts Russia’s oil revenues, which are denominated in dollars. The government earns about half its budget from oil and gas industries.
Ruble-denominated assets also rebounded this year as a cease-fire held in eastern Ukraine and the threat of further sanctions receded. However, the positive effect of the truce has already been priced in, Trigo Paz said.
The ruble lost 0.2 percent to 50.092 per dollar by 2:47 p.m. on Thursday after touching a five-month high of 48.8290 on May 13. Five-year Russian bonds rose for a third day, pushing the yield down three basis points to 10.60 percent. The nation’s local-currency government bonds returned 46 percent in dollar terms this year, the most in emerging markets, according to indexes compiled by Bloomberg.
The central bank bought $981 million worth of foreign exchange from May 13 to May 19, data from the regulator show.
“Stability in the ruble versus the dollar-euro basket is more likely than depreciation in the short term,” Sebastien Barbe, the Paris-based head of emerging-markets research and strategy at Credit Agricole CIB, said by e-mail on Thursday. “I expect intervention to remain in place to limit the ruble appreciation.”