Ruble Drops Most in 2 Months as Ministry Weighs Weaker Currency

The ruble sank the most in two months against the central bank’s basket of currencies after Russia’s Finance Minister supported a weaker currency to stoke flagging growth.

The ruble dropped 1.2 percent against the central bank’s dollar-euro basket, the most since April 17, to trade at 36.9322 by 6 p.m. in Moscow. Of 24 developing-nation currencies tracked by Bloomberg, 20 retreated.

Russia is considering buying foreign currency on the market before sending oil and gas revenue to its Reserve Fund, Finance Minister Anton Siluanov said in comments to Bloomberg published yesterday. The U.S. Federal Open Market Committee starts a two-day policy meeting today almost a month after Chairman Ben S. Bernanke said policy makers could scale back stimulus efforts if the employment outlook showed “sustainable improvement.”

“Pressure for a weaker ruble is mounting,” Bernd Berg, a global emerging-market foreign-exchange strategist with Credit Suisse Group AS in Zurich, said in e-mailed comments. “Authorities might favor a slightly weaker currency, the central bank might turn dovish and the negative external backdrop for high-yielding emerging-market currencies is adding to selling pressures.”

The ruble depreciated 1 percent against the dollar to 32.0495. Three-month volatility rose 26 basis points to 10.14, compared with this year’s high of 11.1950 on June 7, data compiled by Bloomberg show. The yield on benchmark ruble bonds due 2027 rose 14 basis points to 7.70 percent, the highest in a week.

Conducting transactions for the Reserve Fund on the market would be “a neutral operation in terms of buying and selling currency, which, according to estimates, may weaken the ruble exchange rate by 1 to 2 rubles,” Siluanov said.

Muted Impact

In the current market, the net impact of the Finance Ministry’s purchases on the local currency market should be muted, Vladimir Tikhomirov, chief economist at Otkritie Financial Corporation, said in an e-mailed note.

“If oil prices remain at their current levels, the Finance Ministry will need to buy a maximum of $2 billion to $3 billion a month, which accounts for only 0.5 percent to 1 percent of the monthly turnover in dollars on the Moscow Exchange,” Tikhomirov said.

The comments are having a psychological effect on the currency, according to Mikhail Palei, foreign exchange trader at VTB Capital.

“If the finance minister says the ruble to dollar could be 1 to 2 rubles weaker, people start worrying,” Palei said in e-mailed comments.

The Bloomberg Composite Index of emerging-market dollar-denominated debt rose less than 0.1 percent on June 17 to 133.56, climbing for a fourth day.

Bank Rossii, which reports FX intervention data with a one-day lag, spent the equivalent of 2.2 billion rubles of foreign currency on June 14, about a third of what it spent in previous four days. According to traders, the central bank intervenes after a level of 35.65 rubles against the basket.

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