Ruble Pares Best Emerging-Market Rally as Crude Price Declines

  • Sberbank CIB sees tax period giving support to currency
  • Yields on government five-year debt rise for second day

The ruble slid for the first time this week as a drop in crude prices slowed the best emerging-market currency rally in the past three months.

The currency of the world’s biggest energy exporter weakened 0.9 percent to 65.2930 per dollar as of 3:06 p.m. in Moscow as crude declined. Oil’s rebound from a 12-year low in January has propelled the ruble’s 17 percent rally since mid-February, the strongest appreciation among 24 developing nations tracked by Bloomberg.

While Bank of America Merrill Lynch strategists forecast crude is vulnerable in the short term, the price of Russia’s main export earner will trade above $50 per barrel from the fourth quarter into next year, according to a note dated May 17. As 621 billion rubles ($9.5 billion) in taxes come due from May 20 to the end of the month, exporters’ demand for the currency to meet their bills should increase, according to Sberbank CIB.

Looking Stretched

With the ruble near 65 per dollar, “many might be keen to lock in a profit given its outperformance versus emerging markets peers in May," Tom Levinson, chief foreign currency and interest rates strategist at Sberbank in Moscow, said by e-mail. "Key to further ruble gains near term will be whether Brent prices can break above $50 per barrel and the Russian tax period in a week’s time."

Yields on Russian five-year government debt rose for a second day, climbing eight basis points to 9.15 percent, the highest this month on closing basis. The Micex stock index rose 0.2 percent to 1,912.22.

Brent oil fell 0.3 percent to $49.14 per barrel, as a recovery that has bolstered the commodity’s value by 76 percent from a 13-year low on Jan. 20 starts to look fragile, according to Bank of America.

“Tighter U.S. supply and the disruptions in Canada and Nigeria appear well priced-in now," Bank of America analysts David Hauner and Arko Sen said in a note to clients. They closed a trade recommendation to buy the ruble against the South African rand and Russia Eurobonds due 2043 against Turkish bonds of the same maturity.

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