Ruble Drops Most in Emerging Markets With Crude at Six-Month Low

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The ruble slumped to a five-month low and Russian bonds dropped the most in emerging markets as oil slid and worse-than-predicted economic data increased the likelihood that the central bank will add to Friday’s rate cut.

The currency weakened 1.6 percent to 62.73 against the dollar by 4:11 p.m. in Moscow, after losing 10 percent in July, the most among major global currencies. The yield on Russian five-year notes rose 11 basis points to 11.01 percent. Crude declined 2.6 percent to $50.87 a barrel in London, the lowest level since Jan. 30.

The central bank last week stopped daily purchases of foreign exchange and lowered its key rate by 50 basis points as it tries to balance support for the economy with a weakening ruble that risks stoking inflation. Consumer-price gains probably accelerated to 15.8 percent last month from 15.3 percent, according to the median estimate in a Bloomberg survey before a report tomorrow. Russian manufacturing contracted for an eighth month in July.

“The overall trend is negative for the ruble,” said Anton Tabakh, a director of regional ratings at RusRating in Moscow who predicts the currency will keep falling in the medium term. “People are looking at sliding oil. The PMI data affects the ruble indirectly as it raises the chances of a rate cut in September.”

Russia’s purchasing managers’ index fell to 48.3 from 48.7 last month, Markit Economics said today, missing the 48.8 median estimate in a Bloomberg survey. A reading below 50 indicates contraction.

Borrowing Costs

Policy makers lowered the key rate by 50 basis points to 11 percent last week, matching the median estimate in a Bloomberg survey. Borrowing costs were increased 6.5 percentage points to 17 percent in December in an emergency measure to halt a slump in the ruble.

Russia’s currency is 2.9 percent weaker this year after climbing as much as 24 percent through May 13. It slumped 41 percent last year. The gain in five-year yields was the most among 30 developing-nation bond markets tracked by Bloomberg.

The Micex Index of shares dropped 0.7 percent, the first decline in five days, while the dollar-denominated RTS Index dropped 2.6 percent, the most in emerging markets after Greece’s Athex. OAO Gazprom fell 1.2 percent while OAO Sberbank slid 1.6 percent.

OAO PhosAgro shares jumped 5.8 percent to a record after it said that Citigroup Global Markets Deutschland AG has re-opened the conversion function on the company’s global depositary receipts facility after it was closed in June.

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