Ruble Rises Third Day as Tax Demand Offsets Weaker Oil Price

The ruble climbed for a third day as demand from Russian companies to convert export revenue into local currency to pay taxes helped offset weaker oil.

The ruble strengthened 0.3 percent against Bank Rossii’s dollar-euro basket to 35.3187 by 6 p.m. in Moscow. The Russian currency added 0.4 percent against the dollar to 31.3075. The yield on benchmark OFZ bonds due February 2027 increased one basis point, or 0.01 percentage point, to 6.95 percent.

Russian companies were to pay about 200 billion rubles ($6.4 billion) of taxes today, according to Dmitry Polevoy, chief economist at ING Groep NV in Moscow. A further 100 billion rubles are due May 27 with 200 billion rubles of corporate income tax to be paid on May 28, OAO Rosbank analyst Vladimir Kolychev said by e-mail. Brent oil declined 0.2 percent to $104.42 per barrel in London, snapping three days of gains. Oil and natural gas contribute about half of Russia’s budget revenue.

“The market remains sensitive to export flows,” Kolychev said.

Bank Rossii kept its main short-term interest rates unchanged for the eighth straight month on May 15. Policy makers reduced costs on some longer-term loans, including those backed by gold and non-marketable assets, by 25 basis points. The central bank cited elevated inflation, which quickened to 7.2 percent in April, in its statement announcing the cut.

“Last week non-residents were massively selling the ruble in anticipation of rate cuts,” ING’s Polevoy said. “The taxes and the absence of the rate cut could force them close at least part of those positions.”

Once the tax period ends the ruble may weaken, according to Benoit Anne, an emerging-market strategist at Societe Generale.

“The ruble is the prime candidate for a sell-off in the emerging markets FX universe after the recent rally,” Anne said, in an e-mailed note. Societe Generale has closed its trade recommendation for selling the ruble, while betting the Turkish lira will appreciate.

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