Ruble Trims Weekly Rally as Saudi Supply Concern Drives Down Oil

  • Saudi Arabia to only freeze output if Iran, others follow suit
  • Currency, bonds extend losses after monthly U.S. jobs report

The ruble fell the most in a week as oil fell and the U.S. added more jobs than expected, trimming a rally that’s made the currency of the world’s biggest energy exporter look expensive compared with crude.

Russia’s currency sank 1.6 percent to 68.09 per dollar by 5:50 p.m. in Moscow, paring its sixth weekly gain since mid-February to 0.3 percent. Brent, the blend of oil used as the benchmark for Russia’s main export variety, dropped 1.8 percent to $38.89 after Saudi Arabia’s deputy crown prince said the kingdom will only freeze production if Iran and others follow suit.

The ruble is the best performer after Brazil’s real in emerging markets in the past month as oil climbed and signals the U.S. Federal Reserve won’t rush to lift interest rates stoked appetite for developing-nation assets. Those gains have outstripped crude’s advance in March, hurting government revenue as the price of a barrel of Brent in the local currency dropped to the lowest in a month.

“At $40 oil, the ruble should be at around 70 or so versus the dollar,” said Ivan Tchakarov, an economist for Russia at Citigroup Inc. in Moscow. “The currency has been outperforming oil, mainly because of the dollar weakness and Fed dovishness.”

Government bonds also retreated on Friday, lifting the yield on so-called OFZ five-year debt three basis points to 9.25 percent and reducing the weekly decline to five basis points. Local-currency bonds posted the third-best result in emerging markets last month, handing investors a return of almost 15 percent in dollar terms.

“Many global investors were short oil and underweight OFZ bonds," Piotr Chwiejczak, an analyst at BNP Paribas SA, who was the third-best ruble forecaster in the first quarter, said. "As oil started rallying, OFZ yields started looking good, triggering inflows."

The Micex stock index fell 1.4 percent to 1,845.24, bringing the weekly decline to 1.1 percent.

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