Ruble Ends Four-Day Rout as Russia Tax Payments Support CurrencyVladimir Kuznetsov and Ksenia Galouchko
The ruble gained, ending the biggest four-day decline since January, as tax payments outweighed comments from a Russian central bank deputy governor that the world’s best currency rally this year is over.
The ruble climbed 1.7 percent against the dollar, trimming this week’s loss to 1.9 percent, as exporters made purchases to meet tax deadlines, PAO Rosbank analysts said. The currency advanced even after the Bank of Russia increased the cost of borrowing in dollars to bet on a stronger ruble at the start of the week.
Policy makers are making verbal interventions as they seek to curb a 14 percent surge in the ruble this year that’s cutting into budget revenue from dollar-priced exports and hurting companies’ ability to compete with imports. The ruble is stabilizing and its “fast appreciation,” driven by rebounding oil, is over, central bank First Deputy Governor Ksenia Yudaeva said at a conference in Moscow on Wednesday.
“This should be seen as continued verbal intervention to prevent the ruble strengthening much further,” Timothy Ash, the chief emerging-market economist at Standard Bank Plc in London, said by e-mail. The impact of sanctions over Ukraine means the economy “still needs as much support as possible,” suggesting “a softer outlook still for the ruble,” he said.
The currency advanced to 52.9060 per dollar by 4:55 p.m. in Moscow after tumbling 7.6 percent in the previous four days. Government five-year bonds fell for a fourth day, lifting the yield to a two-week high.
The Finance Ministry sold all 25 billion rubles ($473 million) of fixed-rate and floating-rate notes at auctions today as expectations the central bank will continue cutting rates buoyed demand for the bonds, known as OFZs.
“Investors realize that the ruble’s correction doesn’t change OFZs’ long-term prospects,” Dmitry Dudkin, head of fixed-income research at UralSib Capital in Moscow, said in e-mailed comments. “Rates will decline and so will the yields.”
Total demand for the bonds was more than double what was on offer, helping the Finance Ministry sell all the securities on offer for a third week.
The central bank helped make Russian local debt the best-performer in emerging markets this year as it continued to unwind December’s emergency 650 basis-point rate increase. Policy makers are forecast to cut rates 100 basis points at their next rate meeting on April 30.
Russian commodity exporters may be taking advantage of the ruble’s tumble to buy local currency to prepare for tax payments due next week, Rosbank analysts said in the note. The tax payments may come to about 780 billion rubles, according to the median of three analysts polled by Bloomberg.
“Exporters are trying to sell their earnings for the most they can get,” the Rosbank analysts wrote. “By the look of the trading, a level around 54 to 55 per dollar is comfortable for hard currency sales, so we’re unlikely to see a strong move above this before the end of the month.”
The ruble’s declines accelerated on Monday after the Bank of Russia raised the rate it charges banks for foreign currency at repurchase-agreement auctions for the third time in less than a month, narrowing the potential gains of reinvesting the cash in government debt.
The dollar-denominated RTS index of stocks slid for the second day this week, declining 0.8 percent to 999.49. The ruble-based Micex Index fell 1.8 percent to 1,679.82.
OAO Gazprom sank 2.6 percent after European Union regulators attacked Russia’s natural-gas export monopoly’s pricing structure throughout the eastern part of the continent.