Ruble Drops to Worst Month Since 2012 Amid Emerging-Market Rout

The ruble weakened, capping its worst month since May 2012, amid signs of a slowdown in China’s economy and as U.S. stimulus cuts accelerated outflows from emerging markets.

The ruble declined 0.8 percent to 40.8273 against Bank Rossii’s target dollar-euro basket by 6 p.m. in Moscow, when the central bank stops its market operations. That’s a 5.8 percent decline for the month, the weakest performance since May 2012. The yield on government ruble bonds due February 2027 rose one basis point to 8.41 percent, taking the month’s increase to 51 basis points.

Turkey, South Africa and India raised interest rates this week amid a rout in developing-nation currencies sparked by concern that China’s economic growth is slowing and after the Federal Reserve started tapering. Outflows from Russia-focused bond funds quickened to $286 million in the week through Jan. 29, compared with $85 million the previous week, OAO Gazprombank analysts Alexei Demkin and Alexey Todorov said in an e-mailed note, citing EPFR Global data.

“Hedge-funds aren’t ready to flip trades against the ruble,” Vladimir Kolychev, chief economist for Russia at ZAO VTB Capital, said by e-mail.

Emerging-market bond funds have had about $42 billion in redemptions since May last year, according to Gazprombank, when the Fed signaled it may start paring its bond-buying program. Bank Rossii has spent $30 billion since May 29 slowing the ruble’s decline. That helped cut its gold and for-exchange reserves to $496.7 billion, the lowest level since 2011, bank data published yesterday show.

Slowing Growth

Russia’s economy grew 1.3 percent in 2013, less than half the previous year’s pace, according to Federal Statistics Service data published today. That missed the 1.5 percent median forecast of economists surveyed by Bloomberg as investment fell and euro-area demand for oil and natural gas dropped. China’s Shanghai Composite Index completed the worst start to a year since 2010 yesterday after the nation’s manufacturing contracted for the first time in six months.

The central bank lets the ruble trade in a corridor, which currently stands at 34.20 to 41.20 rubles against the basket. As soon as the equivalent of $350 million is sold, the central bank shifts the corridor by 5 kopeks. Bank Rossii has raised the upper boundary of the corridor by 115 kopeks this year.

The ruble depreciated 1 percent against the dollar to 35.2565 today, compared with 32.8350 at the end of last year. The Russian currency dropped 0.7 percent against the euro to 47.6360, weakening from 45.3280 on Dec. 30. An index of the 20 most-actively traded emerging-market currencies fell 0.4 percent to 89.1607 today.

“If the emerging-market currencies as a whole calm down, we’ll soon see a turnaround,” VTB’s Kolychev said.

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