Ruble Declines as Oil's Drop Curbs World's Best March Rally

Are Emerging Markets Stabilizing?
  • Russian currency was the best global performer in March
  • Investors call end to oil-fueled March rally and sell

The ruble fell the most in almost two weeks with oil as Societe Generale SA and Union Bancaire Privee said investors are calling time on a rally that saw it outpace peers as energy markets stabilized through March.

The Russian currency weakened 0.9 percent to 68.222 against the dollar by 6:48 p.m. in Moscow, the third-biggest decliner among 24 developing country peers tracked by Bloomberg, paring a 12 percent surge last month. Oil, Russia’s key export earner, slumped 1.3 percent to $38.18, having suffered the biggest weekly drop since January. 

The ruble’s rise during March was fueled by a recovery in Brent and signals from the Federal Reserve that it would proceed cautiously with future interest-rate increases, making emerging-market assets more attractive to investors. Saudi Arabia’s deputy crown prince said the kingdom will freeze output only if Iran follows suit, adding to pressure on energy markets.

“The ruble is highly unlikely to repeat its very large March gains this month,” said Koon Chow, a senior macro and currency strategist at Union Bancaire Privee in London. “We are seeing a combination of profit-taking, prompted by lower oil prices and by a stronger dollar."

Producers are scheduled to meet this month to discuss an agreement on capping supplies. Iran’s oil minister said he’ll attend the gathering if he finds the time. Russian oil production reached a post-Soviet high in March.

More Declines

A stronger ruble and lower oil prices can strain the country’s finances, making it harder for the government to finance its budget because it depends on energy exports, paid in dollars, for the bulk of revenue.

Yury Tulinov, head of research at Societe Generale’s Russia unit Rosbank PJSC in Moscow said Monday’s move amounts to part of a "technical correction." Tulinov’s team sees the ruble trading at 72 against the dollar on average in the second quarter if oil is at $38.

Five-year government bonds were little changed, keeping the yield at 9.25 percent. The Micex Index of stocks added 0.4 percent to 1,864.

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