Ruble Pares Weekly Loss on Oil as Central Bank Talks Volatility

  • Ruble may get boost next week from exporters preparing for tax
  • Bank of Russia may try to curb volatility, policymaker says

The ruble pared weekly losses amid a rebound in oil prices as the Bank of Russia said it may seek to reduce volatility in the market.

The Russian currency gained 1 percent to 78.771 per dollar by 6:50 p.m. in Moscow, set for a 1.6 percent decline in the week, as a policymaker said on Friday recent volatility is the result of “market imperfections.” Oil climbed on speculation producers will act to bolster prices by cutting output. Five-year government bonds advanced, with the yield falling three basis points to 10.45 percent.

The expected price swings in Russia’s currency over the next three weeks are the widest among global currencies at 30 percent as the price of oil plunged below $30 a barrel and world equities descended into a bear market. While the ruble may receive support from companies that need cash to pay local tax bills of as much as $6.9 billion by the end of the month, oil remains a key driver for sentiment, according to Promsvyazbank PJSC.

“It was a tough week, as oil hit $30 and global markets sold off,” said Alexei Egorov, an analyst at Moscow-based Promsvyazbank OJSC, which had the second-most accurate ruble forecast for 2015. “Next week the ruble may get a boost from exporters selling dollars to pay taxes. We saw limited ruble purchases this week as well."

Central Bank

The Bank of Russia First Deputy Governor Dmitry Tulin said policymakers may use $25 a barrel for the oil price in their risk scenario for 2016, and $35 for 2017 and 2018. The central bank believes diversifying the economy and reducing use of the dollar in bank operations are the only appropriate ways to curb ruble volatility, he said.

The Bank of Russia isn’t trying to influence the ruble rate, however policy makers may act to counter currency volatility that’s a result of market “imperfections,” Tulin said.

The world’s largest energy exporter may cut spending to contain a widening budget shortfall as the economy contracts and the price of crude trades near the lowest in 12 years. The Finance Ministry, which collects almost half of its annual budget revenue from commodity sales, denied reports on Wednesday that it’s discussing ways to weaken the ruble in order to increase the amount of local-currency revenue it gathers on exports.

Volatility Concern

Tulin’s comments followed remarks by Governor Elvira Nabiullina on Thursday said while the central bank is concerned about elevated volatility in the foreign-currency market, policy makers will only step in to intervene if financial stability is threatened.

“Over the last two days central bank officials have been trying to say that they’ll be absent from the currency market for as long as possible on both the top and bottom,” said Dmitri Petrov, a London-based analyst at Nomura International Plc, whose team’s predictions for the ruble were the most accurate in 2015. “The absorption of ruble liquidity should be marginally positive for the ruble as far as policy actions are concerned.”

Russian stock funds lost $19.8 million in the week to Feb. 10, according to Sberbank CIB, which cited EPFR Global data. The Micex Index added 0.9 percent, trimming a 3 percent drop this week.

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