Ruble Weakens to Seven-Month Low, Breaching Intervention Zone
The ruble fell for a fourth day, breaching the level at which the central bank may intervene to curb losses as crude oil declined.
The ruble weakened 0.3 percent against Bank Rossii’s dollar-euro basket to 35.7871 by 11.33 a.m. in Moscow, the lowest level since September. The Russian currency declined 0.3 percent against the dollar to 31.7410.
Oil, Russia’s main export earner, traded down 0.1 percent after a 2.8 percent decline the day before as a report showed crude stockpiles in the U.S. climbed to a 22-year high. Market participants say Bank Rossii may intervene to curb excessive currency declines at a level beyond 35.65 rubles to the basket. The ruble weakened 1.2 percent against the basket yesterday, the strongest drop since July, as oil fell and Finance Minister Anton Siluanov said the government may start foreign currency purchases on the open market in second half of the year.
“Speculators may cool down as the basket approachs the central bank’s intervention level,” Dmitry Polevoy, ING Groep NV (INGA)’s chief economist for Russia, said in a note to clients.
The central bank reports its foreign exchange market interventions with a two-day lag. The last time the regulator intervened in order to shore up the ruble was in November, when it bought 1.71 billion rubles ($54 million), Bank Rossii data show.
Retreating oil prices are pressuring the ruble because the “next taxes are still far away,” Polevoy said. The next tax period starts April 15.
“Even after the crazy move I have little confidence at this point that the ruble will bounce back in a major way,” Benoit Anne, head of emerging-market strategy at Societe Generale (GLE), said in an e-mailed note to clients. “The fundamentals are indeed deteriorating fast, reflecting slower growth and an FX-adverse policy environment.”
The world’s largest energy exporter funnels extra proceeds from oil and gas sales to the Reserve Fund, one of the country’s two sovereign wealth funds, which is also used to help finance the budget deficit. The funds are managed by the central bank under guidelines set down by the Finance Ministry.
The changed means that when oil prices rise, “the ruble will be strengthening slower than before,” Dmitry Dorofeev, BCS Financial Group fixed income strategist, wrote in a note to clients.
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