Ruble Erases Weekly Gain as Fed Liftoff Bets Curb Risk Appetite

  • Oil under $50 signaling ruble may have further to fall
  • Case for Fed rate increase gets stronger after payrolls data

The ruble retreated, erasing this week’s gains, as better-than-expected U.S. jobs data boosted the odds the Federal Reserve will raise rates next month and investors speculated the Russian currency is too strong compared with the price of oil.

The ruble weakened 2 percent to 64.77 per dollar by 6:40 p.m. in Moscow, giving the currency of the world’s biggest energy exporter a 1.3 percent five-day decline. It climbed at the start of the week after the Bank of Russia kept rates on hold on Oct. 30.

Traders increased bets for the Fed to increase rates next month to 72 percent from 50 percent on Monday, damping demand for riskier stocks, bonds and currencies. The price of Brent converted into the local currency was at 3,078 rubles per barrel on Friday versus a 12-month average of 3,355 rubles.

“The ruble will remain jittery about the rate increase until the next important economic data release,” Artem Roschin, a currencies dealer at Aljba Alliance bank in Moscow, said by phone. “After today’s data release, the probability of a rate hike in December has increased dramatically.”

The ruble’s three-month implied volatility, a measure of exchange-rate swings, is the highest globally at 22 percent. Brent crude erased earlier gains, trading 0.2 percent lower at $47.90. The 271,000 gain in U.S. payrolls was the biggest this year and exceeded all estimates in a Bloomberg survey of economists, a Labor Department report showed Friday.

“At current oil prices, below $50 a barrel, the ruble should be trading even weaker, at about 65 against the dollar,” Alexei Egorov, an analyst at PAO Promsvyazbank in Moscow, said by phone.

Government debt maturing in January 2028 fell for the first time in five days, lifting the yield 10 basis points to 9.76 percent and trimming its decline to 31 basis points in the week. The Bank of Russia may resume interest-rate cuts at one of the next policy meetings, the central bank said last week as it kept borrowing costs on hold for a second month. The Micex Index of equities dropped 0.7 percent, snapping four days of gains, led by Sberbank PJSC and Gazprom PJSC.

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