Ruble Slips 3rd Day as Investors Convert Dividends Into Dollars

The ruble weakened for a third day as some shareholders of Russian companies converted dividends into dollars and euros.

The currency declined as much as 0.6 percent before trading less than 0.1 percent lower at 34.4315 per dollar by 6 p.m. in Moscow, set for the weakest close since June 20. The yield on ruble-denominated bonds due February 2027 was unchanged at 8.59 percent.

As Russian companies pay annual dividends, shareholders will convert the equivalent of about $10 billion into foreign currencies this month, VTB Capital analysts Maxim Korovin and Anton Nikitin said in an e-mailed note. Investors abroad have already started to make the switch, according to Dmitry Polevoy, chief economist for Russia and the Commonwealth of Independent States at ING Groep NV in Moscow.

“Gradually the importance of the latter factor will increase,” Polevoy said in an e-mailed note.

Oil company OAO Bashneft was due to pay more than 32 billion rubles ($930 million) in dividends today, while OAO Gazprom Neft has paid out 25 billion rubles, Sberbank CIB analysts wrote in a research note. OAO Rosneft, Russia’s biggest oil producer, which is expected to pay out more than 136 billion rubles, traded without the right to a dividend today, according to data compiled by Bloomberg.

The ruble declined 0.1 percent to 46.7895 against the euro and less than 0.1 percent versus the central bank’s target basket of dollars and euros at 39.9909.

Slowing economic growth and the gap between inflation, which accelerated to 7.8 percent in June, and the real effective exchange rate, are also putting pressure on the ruble, Polevoy from ING said.

The government needs a weaker ruble to bolster budget revenue and the currency will depreciate to 35.50-36.00 per dollar by the end of the year, Polevoy said. The median estimate of 40 analysts in a Bloomberg survey shows the ruble declining to 35.90 per dollar in the fourth quarter.

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