Russia's Ruble Drops Most in Two Weeks on Renewed Oil Pressure

  • Current-account surplus narrows by 50% in first two months
  • Decline in crude price a `negative factor': Credit Agricole

Russia’s ruble fell the most in two weeks as oil declined on receding bets that as supply glut will ease, while Mario Draghi damped a euphoric reaction to stimulus that drove a rally in emerging markets earlier.

The currency of the world’s largest energy exporter gained as much as 1.7 percent against the dollar as the prospect of lower rates in the euro-area made higher-yielding assets more tempting for investors. The ruble then fell after Draghi said the European Central Bank will not cut rates further and as oil retreated 3 percent on media reports the time and date for an international meeting on freezing output is still uncertain.

The ruble has advanced 11 percent in the last month, the most in the world, as the price of Brent crude climbed above $40 a barrel from a 13-year low. An expansion of ECB stimulus would benefit the ruble which gained the most among developing nations when policy makers announced the quantitative easing program last year, Bank of America analysts said today.

“The market focused on the dovishness of the announcement initially, then on Draghi suggesting that there may be no need for rate cuts,” said Sebastien Barbe, head of emerging-market research and strategy at Credit Agricole CIB. The decline in crude was “a second negative factor for the ruble,” he said.

The ruble traded down 0.8 percent to 71.70 per dollar as of 8:30 p.m. in Moscow. The Micex Index of stocks rose 0.1 percent to 1,884. Government bonds fell, pushing the yield on five-year notes up one basis point to 9.36 percent.

Current-Account

Yury Tulinov, head of research at Societe Generale’s Russia unit Rosbank PJS
in Moscow, said sentiment in the currency may have also been hurt by new data on Thursday showing the current-account surplus shrank by 50 percent in the first two months of the year compared with the same period in 2015.

The ruble may repeat a rally that beat other developing nations when the ECB announced the start of its quantitative easing program last year, Bank of America analysts said, while gains for central and eastern European short-term debt are looking overdone. They made their forecasts before the ECB’s sweeping stimulus that expanded asset purchases to 80 billion euros ($86.8 billion) per month and lowered its benchmark rate to zero.

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