Ruble Drops Third Day as Bank Rossii Intervenes to Curb Gains

The ruble slid for a third day against the central bank’s basket as Bank Rossii bought foreign currency in a bid to curb gains that can hurt exporters in the world’s biggest energy supplier.

The ruble weakened 0.8 percent versus the dollar-euro basket to 34.88 by 11:50 p.m. in Moscow, leaving it little changed in the week. The yield on the government’s generic 10-year ruble debt rose five basis points, or 0.05 percentage point, to 6.61 percent after a 26-basis point tumble yesterday, the most since Aug. 7, data compiled by Bloomberg show.

The central bank has bought almost 10 billion rubles ($330 million) of foreign currency since trading started this year after a month without interventions in December, Bank Rossii data show. While Russia is shifting toward targeting inflation instead of the exchange rate, the central bank will still intervene to curb volatility, First Deputy Chairman Alexei Ulyukayev said in October.

Policy makers won’t allow the ruble to appreciate beyond 34.5 to the basket, Ivan Sinelnikov, an analyst for OAO Gazprombank, said by phone from Moscow. “Interventions will follow and may reach as much as $250 million per day.”

The ruble depreciated 0.4 percent against the dollar to 30.3145 and slid 1.1 percent per euro to 40.46. Crude, Russia’s main export earner, slid 0.3 percent to $93.56 a barrel in New York.

The regulator’s purchases are small compared with daily trading volumes and they also send a positive signal on the ruble to investors, according to Sinelnikov, who sees the currency gaining to 29.5 per dollar in the next three months.

Euroclear, OFZs

Expectations the ruble debt market will open in 2013 for direct settlement for foreigners via systems including Euroclear Bank SA and Clearstream International SA are also increasing demand for the Russian currency, Sinelnikov said.

Ruble bonds returned 5 percent in the fourth quarter, compared with gains of 2.5 percent for Brazilian debt, 2.7 percent for India’s and 0.3 percent for China’s, according to JPMorgan Chase & Co. indexes.

While the ruble’s trading hours were extended to 11:50 p.m. this week, policy makers won’t buy and sell foreign currency to influence its movements beyond 7 p.m., Bank Rossii said Jan. 9.

The central bank’s decision to refrain from interventions after 7 p.m. has “no currency implications” because evening trading is “illiquid,” Alexander Morozov, chief economist for Russia at HSBC Holdings Plc in Moscow, said by e-mail today.

The extra yield investors demand to own Russia’s dollar bonds over U.S. Treasuries rose three basis points to 161 basis points, according to JPMorgan Chase & Co.’s EMBI Global Index. An index of five-year government yields increased nine basis points to 6.2481 percent.

Inhibiting Companies

The ruble’s strength is “clearly inhibiting oil and gas performance” where companies’ costs are priced in the local currency, Julian Rimmer, a trader at CF Global Trading UK in London, said by e-mail.

OAO Lukoil, the country’s second-biggest oil producer, retreated 2.1 percent this week in New York, leading the worst start to a year since 2008 for Russian crude producers. The shares closed down 0.2 percent at 2,005.10 rubles in Moscow.

“There is no reason to expect any significant increase in Russian oil companies’ profits this year,” Vladimir Tikhomirov, the chief economist at Otkritie, said by phone from Geneva yesterday. “A stronger ruble doesn’t help exporters.”

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