Russia’s Ruble Climbs as Turkey Seen Driving Flows to Russia

  • Ruble outperforming crude oil on tax, dividend payments
  • Investors may see Russia as Turkey alternative: Promsvyazbank

The ruble extended last week’s rally as exporters bought the currency to pay local dividends and taxes, while some traders speculated the coup attempt in Turkey will spur investors to seek alternatives in the Russian market.

The currency increased 0.7 percent to 63.08 by 6:02 p.m. in Moscow, taking its gain this year to 17 percent, the most in emerging markets after Brazil’s real. Its appreciation on Monday outstripped a 2.2 percent drop for crude oil, Russia’s main export earner, which traded at $46.55 per barrel.

The coup attempt in Turkey is pushing investors to look at other developing-nation assets, including Russia, according to Promsvyazbank, the second-best forecaster of the ruble in 2015. Support from companies converting their foreign earnings into the local currency to pay dividends and taxes along with a broader emerging-market rally has helped the ruble shrug off a slump in crude in the last two weeks.

“Taxes and dividend payments will remain key drivers for the ruble this week,” Alexei Egorov, an analyst at Moscow-based Promsvyazbank, said by phone. “Some investors may switch their investments from Turkey into Russian assets amid uncertainty in Turkey after the failed coup attempt."

Fair Value

The ruble’s gains mean it’s catching up with its fair value relative to oil, according to Egorov, who said the currency should trade as strong as 62 per greenback based on the current price of crude.

About $8.7 billion of export revenue may yet be sold in the final week of the month, when 80 percent of dividend payments are due, on top of about 873 billion rubles ($13.8 billion) of monthly taxes, according to Sberbank CIB calculations.

Five-year generic government bonds were down for a second day, with the yield gaining six basis points to 8.78 percent. The Micex Index of shares fell 0.6 percent to 1,930.

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