Ruble Set for 5-Year Low After Central Bank Limits Intervention

The ruble weakened for a second day, heading toward its lowest close in almost five years against a dollar-euro basket, after the central bank cut its so-called target interventions.

The ruble dropped 0.1 percent to 38.8401 against Bank Rossii’s target basket of dollars and euros by 6 p.m. in Moscow, when the central bank stops its market operations. This is the lowest level on a closing basis since April 2009. Yields on Russian government bonds maturing in February 2027 rose two basis points, or 0.02 percentage point, to 7.99 percent.

The central bank yesterday cut the so-called daily targeted interventions to zero from $60 million, removing yet another support for the ruble as part of its plan to make the currency free-floating by next year.

“The market keeps pricing in the central bank’s move to make the ruble more flexible, which in the current situation means weaker,” Dmitry Dorofeev, a strategist at BCS Financial Group in Moscow, said in e-mailed comments. “Now, all eyes are on the tax period.”

Russian companies, including commodities exporters, are required to pay taxes in the second half of every month, increasing the demand for rubles.

“January is one of the heaviest tax payment months,” Vladimir Miklashevsky, strategist at Danske Bank A/S in Helsinki, said in e-mailed comments. “We estimate the total amount paid to rise up to 830 billion rubles.”

Bank Rossii has spent $27 billion since May, when it started buying the ruble to slow its decline, according to data compiled by Bloomberg.

The ruble weakened 0.1 percent versus the euro to 45.5600 and 0.2 percent against the dollar to 33.3350.

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