Russia's Ruble Slides for Third Day as March Rally Seen Overdone

  • Government bond yields increase to highest in a week
  • Ruble was best-performing currency globally last month

The ruble dropped for a third day as oil traded near a one-month low and strategists speculated last month’s world-beating rally has run out of steam as risk appetite wanes. Government bonds fell.

Russia’s currency weakened 1.1 percent to 69.4440 per dollar by 8:04 p.m. in Moscow, bringing its three-day drop to 3.5 percent, the most on a closing basis since Feb. 2. Oil has fallen from last month’s peak on concern the global glut will persist.

Dovish central banks in the U.S. and Europe and gains in oil spurred demand for riskier assets in March, helping lift the ruble 12 percent. That optimism is fading, while deadly clashes between the former Soviet republics of Armenia and Azerbaijan in the south are also damping the rally, according to Union Bancaire Privee.

“There has been risk reduction and profit taking across emerging markets, prompted by expectations a couple days ago that risk-assets would be unable to repeat the outsized gains made in March,” said Koon Chow, a senior macro and currency strategist at Union Bancaire Privee in London. “There is also a view that global monetary policy has done all it can do to boost asset prices.”

Armenian President Serzh Sargsyan warned on Monday that escalation in the conflict over the disputed Nagorno-Karabakh territory could spiral into a “full-scale war,” threatening to destabilize a region flanked by Russia, Turkey and Iran. The Defense Ministry of the Nagorno-Karabakh Republic said both sides agreed on a cease-fire from Tuesday.

The yield on five-year government notes rose seven basis points to a one-week high of 9.32 percent. The Finance Ministry will offer 30 billion rubles ($433 million) of fixed and floating-rate debt in auctions tomorrow. 

Brent for June settlement was little changed at $37.75 a barrel after touching $37.27, the lowest since March 4.

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