Ruble Trades at May Peak as Rabobank Sees Sign Rally Is Flagging

  • Micex retreats as Gazprom slumps on lower dividend report
  • Brent crude in rubles brings fiscal targets within reach

The ruble rose to its strongest level this month, prompting Rabobank Groep to point to signs the rally may be showing signs of fatigue.

Russia’s currency rose for a second day, taking it 0.4 percent higher to 64.657 against the dollar by 6:13 p.m. in Moscow. The ruble is flirting with the 64 level it hasn’t breached since Nov. 5, an important psychological barrier for traders, according to Piotr Matys, a strategist for emerging-market currencies at Rabobank in London. Oil has climbed 77 percent from a record low on Jan. 20, bolstering the currency of the world’s biggest energy exporter, but Matys said the gains are meeting resistance.

“While the bullish momentum in oil keeps the bias skewed to the upside in the ruble-dollar, the 64 level is proving tough to clear,” Matys said.

Internal drivers may contain the ruble’s rally of 14 percent this year, the biggest among major world currencies. Once the average price of Brent in rubles matches budget targets for 2016, it will relieve pressure on the Russian government to undertake fiscal tightening, Matys said. Brent in rubles rose to 3,189 on Monday, the highest level this year and about 25 rubles above the average the finance ministry needs to meet its budget assumptions.

Limited Appreciation

“There is a risk that with oil perhaps surprising on the upside, the government could be less determined to fully implement reforms that would strengthen public finances,” Matys said. “I maintain my view that the scope for the ruble to appreciate against the U.S. dollar is likely to remain limited in the short-term.”

Five-year local currency bonds fell, pushing the yield five basis points higher to 9.08 percent. The so-called OFZs have handed investors the second-biggest return in emerging markets this year, equal to 18 percent in dollar terms. Russia’s Finance Ministry will offer 24.8 billion rubles at two auctions tomorrow, including 12.8 billion rubles of OFZ bonds due February 2027 and 12 billion rubles of Ruonia floaters due December 2017.

The Micex Index declined 0.8 percent to 1,900, led by Gazprom PJSC, which retreated 3.2 percent.

Gazprom will pay 7.4 rubles a share in 2015 dividends, or 50 percent of net income by Russian accounting standards, Vedomosti reported today, citing two unidentified officials. Under international financial reporting standards, that would equal 16.62 rubles a share, according to Bloomberg calculations. The dividends are part of a plan to squeeze extra revenue from state companies to cover the widest budget shortfall since 2010.

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