Ruble Slides to 11-Week Low as Taper Signal Cuts Risk Appetite

The ruble retreated to the lowest level in 11 weeks against Bank Rossii’s target basket as the Federal Reserve signaled it may taper U.S. monetary stimulus “in coming months,” cutting appetite for riskier assets.

The currency slid 0.3 percent to 38.1301 against the basket of dollars and euros by 6 p.m. in Moscow, when the central bank stops its market operations. That’s the weakest level on a closing basis since Sept. 4 and fourth day of losses. Yields on the government’s February 2027 bonds rose seven basis points, or 0.07 percentage point, to 7.88 percent.

The ruble led decliners among eastern European currencies tracked by Bloomberg after minutes from the Fed’s Oct. 29-30 gathering, released yesterday, showed policy makers’ readiness to trim $85 billion in monthly bond buying if the economy improves as anticipated. Emerging-market stocks fell for a third day and the region’s currencies declined.

“Foreigners are dumping the ruble after the Fed’s minutes,” Dmitry Dorofeev, a strategist at BCS Financial Group in Moscow, said in e-mailed comments.

The ruble depreciated 0.4 percent against the euro to 44.4100 and weakened 0.2 percent against the dollar to 32.9925. An index of the 20 most actively-traded emerging-market currencies declined 0.2 percent to 92.7153, retreating for the third day, data compiled by Bloomberg show.

The Russian central bank steps in with the equivalent of $200 million in daily ruble purchases at 37.60 rubles against the basket and increases interventions to $400 million at 38.60 after the latest 5-kopek shift of the ruble trading corridor.

Intervention Zone

“The ruble is well in the central bank intervention zone, and exporters may step up to support in coming days,” BCS Financial’s Dorofeev said.

Russian companies pay mineral extraction tax on Nov. 25 and corporate income tax on Nov. 28, according to the Federal Tax Service schedule.

The ruble will weaken to 35 rubles per dollar by the end of 2014 as the central bank diminishes its interventions, while the market concentrates on weakening fundamentals, OAO Alfa-Bank analysts led by Natalia Orlova said in an e-mailed report, lowering their forecast by 1 ruble.

“A combination of slower growth, balance of payments seasonality and a lower commitment to supporting the ruble will cause faster depreciation,” according to the Alfa Bank analysts.

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