Ruble Pares 1st Quarterly Drop Since June as Crude Mutes Cyprus

The ruble pared its first quarterly drop since June against the central bank’s basket after rising oil prices eased concern Europe’s debt crisis will hurt the economy of the world’s biggest energy exporter.

The ruble advanced 0.3 percent against the dollar-euro basket to 34.9684 by 3:59 p.m. in Moscow, heading for a 0.4 drop since December. The currency added 0.3 percent to 31.02 against the dollar.

The ruble has weakened 10 kopeks against the basket since the outbreak of the crisis in Cyprus. That’s “not surprising” with crude trading above $110 a barrel in London, Raiffeisenbank analysts led by Denis Poryvay said in e-mailed note. Oil and gas bring about 50 percent of Russia’s budget revenue. Brent oil, which isn’t trading today due to public holidays, rose 0.4 percent in March to $110.02 a barrel.

The yield on OFZ bonds due Feb. 2027 declined one basis point, or 0.01 percentage point, to 7.35 percent, the lowest in three weeks. The yield is 51 basis points higher than a record-low 6.84 percent, reached on Jan. 10.

Many investors, including foreign funds, “started positioning” for a central bank rate cut, VTB Capital analysts Maxim Korovin and Anton Nikitin wrote in an e-mailed note. Bank Rossii holds an interest-rate meeting on April 2.

The probability of a rate cut implied by 1-2 month non-deliverable forward dollar contracts has increased to 60 percent from 15 percent in the last week, OAO Rosbank analysts led by Vladimir Kolychev wrote in an e-mailed note.

The implied 1-month NDF rate increased one basis point, or 0.01 percent, to 6.28 percent.

Before it's here, it's on the Bloomberg Terminal.