Ruble Declines to Basket as Oil Dips, Cyprus Talks Continue

The ruble declined against the central bank’s target dollar-euro basket as oil declined and talks between Russia and Cyprus on aid for the Mediterranean island continued.

The Russian currency fell 0.2 percent against the basket to 34.9794 by 7 p.m. in Moscow and weakened 0.3 percent against the dollar to 30.9385. The yield on OFZ bonds due February 2027 dropped one basis point, or 0.01 percentage point, to 7.42 percent.

Brent oil retreated as much as 0.8 percent to $107.82 per barrel in London. Crude and natural gas contribute about 50 percent of Russia’s government revenue. Cyprus is offering Russia “opportunities” including banking and natural gas assets after lawmakers rejected a levy on bank deposits imposed by euro-area finance ministers, Finance Minister Michael Sarris said today in Moscow.

“Everything’s in line with global markets,” Igor Akinshin, a foreign exchange trader at OAO Alfa Bank in Moscow, said by phone. “The basket stays in the tight range, in which it has been trading for quite a long time.”

The ruble has lost 0.4 percent against the basket since the start of the year, while 30-day implied volatility has almost halved and reached 3.25 during this period.

The local tax period, which supports the currency as companies convert dollars and euros to rubles, continues March 25 with mineral extraction and excise taxes.

Russia needs “a global move, a change in views, because there is a feeling, that -- apart from bonds - the Russian market is not interesting as an asset class,” Akinshin added.

Sell on Strength

Investors should use periods of ruble strength in the tax period to open long positions in the dollar and basket against the ruble, according to VTB Capital in Moscow. Global risk sentiment and oil prices are unsupportive for emerging-market currencies, while rate cuts aimed at bolstering the economy may start in April, hurting the ruble, VTB analysts Maxim Korovin and Anton Nikitin said in a note to clients.

Deputy Economy Minister Andrei Klepach said Russia was seeing a “fragile” economic trend, with seasonally adjusted gross domestic product in February declining 0.1 percent on the previous month.

Russian retail sales rose 2.5 percent in February, the state statistics service said yesterday, missing a 3.3 percent forecast by economists surveyed by Bloomberg. Industrial investment also missed estimates, rising by 0.3 percent compared with a 1 percent forecast.

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