Hedge Funds Trim Bullish Bets as Russian Ruble Swings With Oil

  • Funds pared their net long ruble wagers first time in 6 weeks
  • Growing Fed December rate liftoff bets pose risks to currency

Hedge funds trimmed bets for the ruble to appreciate for the first time in six weeks as swinging oil prices and the prospect for higher U.S. interest rates threaten to exacerbate the Russian currency’s losses.

Speculators were net long the ruble by 2,053 futures in the week ended Nov. 3 from 2,090 a week earlier, according to U.S. Commodity Futures Trading Commission data published Friday. Russia’s currency fluctuated between a loss of 0.6 percent and a gain of 0.7 percent on Monday as oil, the country’s main export earner, decreased for a fourth day, as a supply glut weighed on prices.

The shift in wagers reflects "growing expectations that the Federal Reserve may increase interest rates" in December, according to Piotr Matys, a strategist for emerging-market currencies at Rabobank in London, who expects the trend will continue. Russia’s currency has fallen in the past three weeks, trimming an advance that’s boosted it by 1.3 percent since August, the fourth-best performance in emerging markets. Brent crude, which is used to price Russia’s main export blend, retreated to as low as $47.12 a barrel on Monday.

“Fairly high interest rates provide the ruble with a layer of insulation, but if oil prices fall further, the Russian currency will be vulnerable against the broadly stronger dollar," Matys said.

The hedge-fund figures were collected before the U.S. jobs data on Friday showed the biggest monthly surge in payrolls this year. Odds for a Fed rate increase in December climbed to 70 percent from 56 percent before the report.

Russian bonds fell for a second day, pushing yields on Russia’s five-year local-currency debt up by seven basis points to 10.03 percent. The rate touched a one-year low last week.

On the Micex Index of equities, Sberbank PJSC lost 1.2 percent after 10-month net income at Russia’s largest lender dropped 39 percent from the year earlier, according to local accounting standards. Novolipetsk Steel OJSC, Russia’s largest steelmaker, rose 4.3 percent after third-quarter net income jumped.

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