Ruble Gains on Tax Deadline as SocGen Sees Rally Momentum Waning

  • Promsvyazbank's Egorov expects ruble to fall to 63 this week
  • Brent in ruble terms trades below average for past 12 months

The ruble rose as it took strength from buying by Russian companies to meet local taxes and the price of oil became a much smaller swing factor.

Russia’s currency gained 0.7 percent to 61.83 per dollar by 3:29 p.m. in Moscow, while Brent crude rose 0.4 percent to $48.80. The 30-day correlation between the two assets dropped to about 0.72 from as much as 0.92 on Oct. 6, an all-time high. At a reading of 1, they would move in lockstep. Russian companies are due to pay about 483 billion rubles on Oct. 26, according to Sberbank CIB, boosting demand.

“Companies buying rubles to pay local taxes are helping the currency,” Alexei Egorov, an analyst at PAO Promsvyazbank in Moscow, said by phone.

The ruble’s 6.8 percent advance in the past month has meant that it outperformed oil’s decline in the period -- a phenomenon both Promsvyazbank and Societe Generale SA see as fleeting as the currency begins tracking crude again.

Diminished Revenue

Societe Generale forecasts the exchange rate will trade at 60 to 65 a dollar in the coming weeks as it moves more in line with oil, which has fallen almost 1 percent in the past month. That discrepancy pushed the price of Brent in ruble terms to 3,019.03 a barrel on Tuesday, near the lowest level since August and below the average for the past 12 months.

The stronger ruble is curtailing the government’s local-currency earnings from its main export earner, threatening to worsen Russia’s budget deficit as the sanctioned country contends with its first recession since 2009.

Given where Brent is trading in ruble terms, "it’s a sign that the ruble might face difficulties heading below 60 per dollar," Bernd Berg, a London-based emerging-markets strategist at Societe Generale, said by e-mail. "If Brent in rubles gets down to the 3,000 area, we expect further dollar buying."

Government bond yields rose for the first time in five days, with the rate on five-year securities up two basis points to 10.3 percent. The Finance Ministry tomorrow will offer 12.5 billion rubles of OFZs due in May 2020 and 12.5 billion rubles of floating-rate OFZs due December 2017.

The Micex Index of stocks was little changed. Sberbank PJSC gained 1 percent, while Novatek OJSC fell 2.1 percent. Goldman Sachs Group Inc. cut the shares to neutral yesterday, according to an e-mailed note.

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