Ruble Strengthens Against Basket as Local Taxes Bolster Demand

The ruble appreciated as Russian companies prepared to pay local taxes before the weekend.

The ruble advanced 0.2 percent to 37.1000 against Bank Rossii’s target basket of dollars and euros by 6 p.m. in Moscow, when the central bank stops its market operations. The yield on government bonds due February 2027 rose four basis points, or 0.04 percentage point, to 7.57 percent.

Russian companies are due to pay about 200 billion rubles ($6.3 billion) in excise and mineral extraction taxes tomorrow, Vladimir Miklashevsky, an analyst at Danske Bank A/S in Helsinki, said by e-mail. U.S. payrolls growth missed estimates this week, stoking bets the Federal Reserve won’t rush to cut stimulus that has boosted appetite for emerging-market securities.

“Until tax payments end, only a notable worsening of global market conditions can upset the current market balance, favoring the ruble,” Dmitry Polevoy, chief economist for Russia and CIS at ING Groep in Moscow, said in an e-mailed note. A Fed stimulus cut “seems to be postponed until the second quarter of 2014, which should support the demand for risky assets and depress the dollar,” he said.

The Russian currency strengthened 0.3 percent against the dollar to 31.6875 and advanced 0.1 percent against the euro to 43.7320.

Bank Rossii reported its first purchases of foreign currency on the markets since February. The regulator bought 1.91 billion rubles for the Federal Treasury on Oct. 22, which uses it to fill the Reserve Fund, investing in hard currency-denominated assets.

Treasury Order

The Treasury plans to buy the equivalent of 10 billion rubles of dollars, euros and British pounds from the central bank in the week to Oct. 29, it said Oct. 21.

“The central bank’s execution of the Federal Treasury order is not having much impact on the market yet because the volume has not exceeded $300 million this week,” Maxim Korovin and Anton Nikitin, analysts at OAO Bank VTB’s investment arm, said in an e-mailed note.

“We see an increasing chance of the Ministry of Finance raising its demand for foreign currency at the end of the year due to the good implementation of the domestic borrowing program,” they said.

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