Ruble Slumps With Crude Oil as Credit Suisse Sees New-Year Rally

  • Bank of Russia may buy $8 billion in 1Q, Credit Suisse says
  • Alexey Pogorelov predicts 50bps of rate cuts by year-end

The ruble weakened the most worldwide, sinking in lockstep with falling crude prices. Credit Suisse Group AG predicted the currency of the world’s biggest energy exporter will rally in the new year, triggering a resumption of dollar-buying by the central bank.

The ruble fell for the first time in four days as oil tumbled on data that showed the Chinese economy grew at the slowest pace since 2009 in the third quarter. Russian policy makers will cut interest rates 50 basis points by the end of the month as the ruble stabilizes and may need to intervene to tame its gains in the first quarter, Credit Suisse economists said in a note today.

"Neither the commodities markets nor the currencies markets have fully absorbed the Chinese data, so there’s a chance the ruble will test the level of 62.50 to 63 in the next few days," Evgeny Koshelev, an analyst at Rosbank PJSC in Moscow, said. At the same time, companies buying rubles to pay local taxes in the second half of the month will help prop up the currency, he said.

‘Exceptionally Strong’

While the ruble dropped the most among 31 major currencies tracked by Bloomberg on Monday, it’s still 5.4 percent stronger in October, making it the fifth-best performer. The currency weakened as much as 1.7 percent, before trading down 1.2 percent at 62.0220 per dollar as of 7:38 p.m. in Moscow.

The ruble has tracked Brent oil’s 15 percent recovery from a six-year low in August, spurring wagers the central bank will resume cutting rates at its next meeting to ease the economic recession. Five-year government ruble bonds climbed for a fourth day, lowering yields two basis points to 10.28 percent.

“The ruble will be stable in the coming months and exceptionally strong in the first quarter,” amid a seasonal contraction in imports, Alexey Pogorelov, an economist at Credit Suisse in London, wrote in the note. The Bank of Russia “will be forced to resume its regular foreign-exchange purchases in order to contain excess appreciation,” buying about $8 billion in the first three months next year, he said.

Companies are accumulating foreign currency and will weather the peak of overseas debt payments in December, according to Credit Suisse. Corporations will need to pay about $24 billion that month, central bank data show. Last year, the Bank of Russia introduced emergency foreign-currency cash auctions to help companies manage their debt burden as sliding oil prices and sanctions over Ukraine sent the ruble into a nosedive.

Central bank Governor Elvira Nabiullina has said she wants to build the country’s international reserves back up to $500 billion after interventions to slow the ruble’s declines sapped the cashpile last year. The Bank of Russia bought about $10 billion from mid-May through late July before suspending purchases following a bout of ruble weakness and a surge in volatility.

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