Ruble Sinks Second Day on Economy Woes as Bond Auction Scrapped

The ruble slid for a second day on weaker-than-forecast economic data as Russia canceled its second bond sale this month and the central bank chairman warned capital outflow remains “abnormally high.”

The ruble dropped 0.6 percent against the central bank’s dollar-euro basket to 37.1181 by 6 p.m. in Moscow, nine kopeks off the weakest level this year, reached June 11. The Russian currency slid 0.6 percent against the dollar to 32.1975, making it the worst performing emerging-market currency after Indonesia’s rupiah among 24 tracked by Bloomberg.

The Finance Ministry scrapped a sale of 15-year ruble debt today, citing a lack of bids. Russian industrial production unexpectedly shrank 1.4 percent in May from a year earlier, missing the median estimate for a 0.6 percent gain among 22 economists surveyed by Bloomberg, data showed yesterday. U.S. Federal Reserve Chairman Ben S. Bernanke may shed more light on when the Fed plans to trim its bond buying today.

“Industrial production was quite disappointing,” Vladimir Miklashevsky, an economist at Danske Bank A/S, said in e-mailed comments.

The International Monetary Fund yesterday cut its growth forecast for Russia to 2.5 percent this year and 3.25 percent in 2014, compared with April predictions of 3.4 percent and 3.8 percent, respectively. The Washington-based lender cautioned the country against the danger of stoking inflation with fiscal stimulus, urging policy makers to improve the business climate.

The drop in industrial production is of a “fundamental nature,” ZAO Raiffeisenbank analysts wrote in an e-mailed note.

Capital Outflows

The ruble’s three-month volatility rose 33 basis points to 10.4475, 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 fell three basis points, or 0.03 percentage point, to 7.67 percent and an index of 20 emerging-market currencies compiled by Bloomberg was little changed.

While Russian capital outflow sank to $54 billion in 2012 from $81 billion the year before, it remains high, central bank Chairman Sergey Ignatiev said today in Moscow.

The Finance Ministry planned to sell 10 billion rubles ($311 million) of the 15-year bonds with guidance of 7.70 percent to 7.75 percent, according to statements this week. The yield on the bond climbed two basis points to 7.84 percent before the results were announced, extending a 13 basis point increase yesterday. The ministry sold all 10 billion rubles of the three-year notes it offered in a separate auction.

The central bank started buying rubles on May 29 to slow its slide. Bank Rossii, which reports currency intervention data with a delay, spent the equivalent of 2.21 billion rubles of foreign currency on June 17. According to traders, the central bank intervenes after a level of 35.65 rubles against the basket.

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