Ruble Gains to 8-Month High on Tax Payments, Oil Price Advance

The ruble strengthened to the highest level in eight months as monthly tax payments boosted demand for the Russian currency and oil, the nation’s chief export, advanced.

The ruble appreciated for a third day, adding 0.2 percent to 30.1765 per dollar by 7 p.m. in Moscow, the highest level since May 11. It gained 0.1 against Bank Rossii’s target dollar-euro basket to 34.7063.

Demand for rubles from corporate taxpayers and banks will lead to further strengthening in the coming weeks, according to VTB Capital. The MosPrime interbank overnight lending rate rose 13 basis points yesterday to 5.88 percent, the highest level since Jan. 9, before retreating to 5.48 percent today. Demand for rubles at the central bank’s morning repo auction today was more than four times the 10 billion rubles ($332 million) offered, the regulator’s data show.

“Interest rates will rise to 6 percent and higher by the end of this week and start of the next week,” Dmitry Polevoy, an analyst at ING Groep NV, wrote in an e-mailed note.

Crude oil, Russia’s biggest export, rose 0.1 percent in London to $112.52 per barrel.

Auctions Mixed

Yield on bonds maturing in July 2022 fell one basis point, or 0.01 percentage point, to 6.74 percent. The rate on June 2017 debt slid two basis points to 6.24 percent, its lowest in a week.

The Finance Ministry sold 10.5 billion ruble of January 2028 bonds at 7.09 percent after putting up 15 billion rubles of the debt on sale today. The ministry placed its target of 35 billion rubles of bonds maturing in December 2019, according to a statement.

Russia may hold its first domestic bond auction with direct settlement through Euroclear Bank SA this month, opening the Treasury market to foreign investors, Deputy Finance Minister Sergei Storchak said in Davos after the Russian market closed.

The next OFZ debt auction is scheduled for Jan. 30.

“We expect some additional inflows to the OFZ market once Euroclear becomes operational, which we still expect to happen by the end of January,” Maxim Korovin and Anton Nikitin, analysts at VTB Capital, said in a research note e-mailed before the auctions and Storchak comments.

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