Ruble Trims Decline on Oil Gains as Kudrin Report Spurs Optimism

Kudrin May Return to Russian Government
  • Brent crude rises for third day in four on U.S. inventories
  • Kudrin is said to have met with Putin, Medvedev about new post

The Russian ruble pared declines as Brent crude advanced and the nation’s former finance minister was said to be in talks about returning to a senior post.

The currency depreciated 0.2 percent to 72.38 per dollar by 5:59 p.m. in Moscow, having slumped earlier as much as 0.9 percent. The ruble has fallen 8.2 percent this month, compared with a 16 percent retreat in Brent crude. Five-year government notes gained for a fifth day.

Crude rose for a third day in four as investors weighed forecasts for falling U.S. stockpiles. Alexei Kudrin, whom investors credit with imposing budget discipline that’s helped Russia survive the economic crisis, has met privately with the Russian president and Prime Minister Dmitry Medvedev as recently as last week to discuss a return to the government, though no formal offer has yet been made, according to three people familiar with the discussions.

“Kudrin is a professional and this news is definitely positive, impacting the ruble in addition to the price of oil,” said Alexander Losev, chief executive officer at Sputnik Asset Management in Moscow. Getting details of Kudrin plan of action will be important, Losev said.

Ruble Outlook

The ruble, which is set for its third annual decline, will struggle to gain ground as oil remains weak and the government struggles to balance the budget. Hedge funds and large speculators were net short 835 futures contracts on the currency in the week ended Dec. 22, wagering the ruble will decline in value, according to U.S. Commodity Futures Trading Commission data. That compares with net long positions of 836 in the prior five trading days.

Russia has been getting less than 3,000 rubles for each barrel of oil it sells this month, compared with a one-year average of 3,240 rubles, according to Brent prices converted in the local currency.

“The ruble is catching up with the low price of oil,” said Aram Kazaryan, a currency options trader at Bank FC Otkritie in Moscow, who expects the currency to weaken further before end of the year to about 74 against the dollar. “Supportive factors, such as tax payments, have ended and liquidity is low because of the holidays."

The Micex Index of shares added 1.3 percent, extending its 26 percent advance this year.

Russian markets will be closed on Dec. 31 and Jan. 1. Markets are open in Russia from Jan. 4 to Jan. 6 and closed again on Jan. 7 and 8 for Orthodox Christmas.

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