Ruble Seen Extending Worst Drop Since January on Debt, Greece

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The ruble extended its biggest monthly drop since January, with PAO Rosbank, Credit Suisse Group AG and Renaissance Capital seeing more weakness in the third quarter because of the crisis in Greece and external debt payments.

Russia’s currency retreated less than 0.1 percent to 55.764 against the dollar at 4:45 p.m. in Moscow. The ruble is headed for a 6.2 percent drop this month, the most since January, while Brent crude is 4 percent weaker in June. Bonds gained as the Finance Ministry said it plans to sell 275 billion rubles ($4.93 billion) of debt in the third quarter, the most since the first three months of 2014.

The rising likelihood Greece will leave the euro region is one more reason to be wary of the Russian currency. Oil-price risks and looming foreign-debt payments, in addition to the central bank’s foreign-currency purchases, will continue exerting pressure on the ruble in the next three months, according to RenCap and Rosbank.

“We’re expecting further weakness for the ruble in the upcoming quarter, with the nearest target at 60 against the dollar,” Yury Tulinov, the head of research at Rosbank in Moscow, said by e-mail. “Overall the combination of Greece, oil, the central bank interventions and debt redemption is negative for the ruble.”

Greece triggered a $1.5 trillion global equity rout Monday after it called for a July 5 referendum on creditor demands, closed its banks and imposed capital controls. It’s set to withhold a $1.7 billion payment to the International Monetary Fund. Greece’s government has asked for a two-year bailout program from the European Stability Mechanism, according to a statement from the office of Prime Minister Alexis Tsipras.

Cash Pile

The ruble is the biggest decliner among emerging-market currencies this month. The Bank of Russia bought about $5.96 billion since May 13 as it seeks to boost the nation’s reserves to $500 billion from $361 billion.

Brent crude climbed 1.6 percent to $62.97 a barrel on Tuesday. It touched a six-year low of $45.19 on Jan. 13 and reached $69.63 on May 6.

RenCap forecasts the ruble will average 57 against the dollar during the rest of the year if Brent is at $60 a barrel and if the central bank resumes spending reserves in the fall, according to Oleg Kouzmin, RenCap’s economist in Moscow.

“Ruble pressures could start building up closer to September,” Kouzmin said by e-mail. “Foreign investors could start converting dividend receipts from our biggest oil and gas companies into dollars at the end of summer, while companies and banks face another increase in external-debt redemptions at the start of autumn.”

Debt Payments

Russian companies face about $33 billion in foreign-debt payments in the three months through Sept. 30, compared with about $21 billion in the second quarter, according to central bank data.

Yields on the government’s five-year notes fell three basis points to 11.24 percent. The Finance Ministry plans to offer 15 billion rubles of floating-rate bonds due in December 2017 on Wednesday.

“In terms of redemptions, next quarter is to be the most challenging,” VTB Capital analysts including Maxim Korovin said in an e-mailed note. “Almost all the maturities left in 2015 fall in the next three months,”

The Micex Index of stocks added 0.4 percent to 1,640.87, led by OAO Lukoil and OAO Sberbank. The dollar-denominated RTS Index was little changed after dropping to the lowest since June 8 on Monday.

“We expect further gradual weakening of the ruble,” Alexey Pogorelov, the chief economist for Russia at Credit Suisse Group AG, said by e-mail. “The central bank policy of beginning interventions was a game-changer.”

Russian officials warned in April the ruble’s world-beating advance this year had gone too far as a stronger currency crimps Russia’s export revenue.

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