Ruble Weakens First Time in Three Days on Crude, CPI Slowdown

The ruble weakened for the first time in three days against the central bank’s basket of currencies as oil fell and July inflation decelerated to lowest in eight months, boosting chances of an August rate cut.

The ruble depreciated 0.1 percent to 37.7207 against Bank Rossii’s dollar-euro basket by 6 p.m. in Moscow, when the central banks stops its trading operations. The Russian currency weakened 0.2 percent against the dollar to 32.9085. The yield on benchmark OFZ bonds due February 2027 dropped two basis points, or 0.02 percentage point, to 7.71 percent.

Brent crude fell for the second day, losing 1 percent by 6 p.m. in Moscow to $107.83 a barrel. Income from oil and gas exports comprise about a half of Russia’s budget revenue. Inflation decelerated to slowest pace in eight months in July with prices showing annualized growth of 6.5 percent compared with 6.9 percent in June, the Federal Statistics Service said in an e-mailed statement. That matched the median estimate of 19 economists in a Bloomberg survey.

“CPI numbers were strong, but we’d twitch only if they were something supernatural,” Igor Akinshin, a foreign exchange trader at OAO Alfa Bank in Moscow, said by phone. “Activity on the market is very low.”

The consumer price index for July is 0.5 percentage points above the upper level of Bank Rossii’s target inflation band of 5 percent to 6 percent. The regulator will hold its next interest-setting meeting on August 9.

“In combination with very weak recent data on economic activity in Russia, this paves a way to policy rates cut already at the central bank’s next rate setting meeting on Aug. 9,” Alexander Morozov, an economist at HSBC Holdings Plc, said in an e-mailed note.

Dividend Payments

Foreign currency demand for dividend payments may reach as much as $6 billion in August, Dmitry Dorofeev, an analyst at BCS Financial Group in Moscow, said in a note on July 26.

“This is a strong factor against the ruble, although it’s very much spread across time and very unclear in terms of volumes,” Akinshin from Alfa Bank said.

The central bank, which reports foreign-exchange interventions with a lag, spent the equivalent of 6.6 billion rubles ($200 million) in foreign currency on Aug. 1 buying rubles. Bank Rossii spent about the same amount every day from July 8 until the end of last month. On July 30 and July 31 it increased buying to 7.57 billion rubles and 8.12 billion rubles, respectively.

The Finance Ministry said it will offer 10 billion rubles in OFZ bonds due January 2023 and 10 billion rubles in OFZ due May 2016 at auction on Aug. 7. On July 31, the ministry sold 3 billion rubles of bonds due December 2019 out of 15 billion rubles offered.

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