Ruble Pares Gains to Basket as Central Bank Signals Lower Rates

The ruble pared gains as speculation Russia will lower interest rates offset demand driven by rising prices for crude, the country’s main export.

The ruble appreciated 0.2 percent against Bank Rossii’s dollar-euro basket to 35.9902 by 6 p.m. in Moscow. The local currency was little changed against the dollar at 31.6705 after strengthening to as much as 31.5150 earlier.

Central Bank Chairman Sergey Ignatiev said he sees a “continuing trend toward a decline in interest rates” at a meeting today. Bank Rossii cut some of its secondary market rates on April 2. Brent oil traded 0.3 percent higher at $99.95 per barrel after climbing to $101.04 per barrel earlier. Revenue from sales of crude and natural gas comprise about 50 percent of Russia’s state budget income.

“The beginning of the monetary policy easing is just a matter of time,” HSBC Plc analysts Alexander Morozov and Artem Biryukov said in an e-mailed report. “Lower policy and money market rates will likely reduce the positive carry in the ruble, which will make ruble less attractive on a comparative basis.”

The ruble remains weak due to expected monetary easing as well as the possibilty of foreign exchange purchases on the open market by the Finance Ministry, OAO Rosbank analysts led by Vladimir Kolychev wrote in a note to clients.

“Ignatyev’s comment was a negative signal,” Anton Zakharov, a commodities and foreign exchange analyst at OAO Promsvyazbank, said by phone from Moscow.

The HSBC analysts forecast two rate cuts of 25 basis points each in July and October. They recommended selling the ruble against the basket.

Currency Interventions

The Russian currency continued trading weaker than 35.65 to the basket, the level beyond which the central bank spends about $70 million a day to curb declines, according to HSBC. Bank Rossii reported it sold the equivalent of 2.2 billion rubles ($70 million) in foreign currency on April 18, the regulator said today on its website today.

The yield on benchmark OFZ bonds due February 2027 was unchanged at 7.01 percent. The Finance Ministry will offer 20 billion rubles each of OFZ bonds due 2019 and 2028 at auctions on April 24, according to the ministry’s website. That’s the biggest offering since January 23.

Russian companies are due to pay 200 billion rubles ($6.3 billion) in taxes today and 200 billion rubles on April 25, Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp., said by e-mail.

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