Russia’s Ruble Declines in Week as BofA Flags Seasonal Pressure

  • Investors withdrew $17.4m from Russian equities: Sberbank CIB
  • Bank of America warns of pressure from seasonal import rise

The ruble had the second-biggest weekly retreat in emerging markets ahead of a seasonal pickup in import demand from Russian consumers that Bank of America Corp. said may add pressure in coming months.

The Russian currency fell 0.1 percent to 66.85 against the dollar by 5:29 p.m in Moscow, headed for a weekly decline of 2.1 percent. Brent crude, the oil benchmark for pricing the country’s export staple, dropped 1.4 percent in London to $48.11 per barrel.

Russia is approaching a period of "adverse seasonality" in its trade balance in the second and the third quarters of the year as imports rebound from an annual post-holiday slump in demand in January-February, Bank of America said. This may "undermine support" for the ruble, which is also the second best-performing emerging market currency this year, by increasing demand for dollars to buy goods from abroad.

"This seasonality could easily be dominated by secular oil movements in either direction," Vladimir Osakovskiy, chief economist for Russia at Bank of America in Moscow, said in a note to clients. "However, oil is also subject to negative seasonality in the third quarter which could further undermine risk-reward for the ruble."

Carry Inflows

The ruble has declined against the dollar three years out of the last five in May according to data compiled by Bloomberg.

At the same time, Deutsche Bank AG recommended buying the ruble against the dollar-euro basket as "crude stabilization should continue to drive carry-seeking inflows and shift the focus to improving macro fundamentals,” analyst Gautam Kalani said in an e-mailed note.

Russian five-year sovereign bonds rose for the first time in four days, lowering the yield three basis points to 9.16 percent. The Micex equities index traded 0.4 percent lower. Investors withdrew $17.4 million from Russian equities in the week to May 18, Sberbank CIB said in a note, citing EPFR Global data.

European Union nations are set to renew sanctions against Russia in June for six more months because of deadlock in implementing a 2015 peace accord to end fighting in eastern Ukraine, according to six European officials.

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