Ruble Falls a Second Day as Further Gains in Oil Seen Limited

  • Currency’s 30-day correlation with oil near highest in a month
  • Government offering most OFZs since May at auction tomorrow

The ruble weakened for a second day amid forecasts that the rebound in oil prices since January is reaching an end, limiting further gains for the second-best performing currency in emerging markets this year.

The currency slipped 1 percent to 64.56 per dollar by 5:26 p.m. in Moscow as Brent crude, used to price the country’s main export blend, fell 4 percent to $48.12 a barrel. Bonds fell for a second day, pushing yields on five-year debt up the most in more than three months.Stocks also declined.

While crude has rallied about 75 percent since January, Vitol Group of Cos., the world’s largest independent oil-trading house, predicted prices will end the year close to current levels. As Russia relies on oil and natural gas sales for about a third of budget revenue, the outlook suggests a rally in the nation’s assets may lose momentum.

“The less favorable oil-price backdrop, global growth worries and some profit-taking will likely take a toll on the currency today,” said Ivan Tchakarov, a Moscow-based economist for Citigroup Inc.

The ruble’s 30-day correlation with the price of oil was at 0.69, near the highest in a month on Tuesday. A value of 1 would mean the assets are moving in lockstep.

Vitol’s forecast, which coincides with a similar view from Goldman Sachs Group Inc., would mean oil-rich countries and the energy industry face a prolonged period of low prices. The ruble has strengthened about 14 percent versus the dollar this year, second only to Brazil’s real among 24 emerging-market currencies tracked by Bloomberg.

The Micex Index of stocks fell 0.6 percent. Magnitogorsk Iron & Steel OJSC and Sberbank PJSC led decliners.

The Finance Ministry will offer the most bonds since May 11 at auctions tomorrow. It’ll offer 20 billion rubles ($309 million) of September 2026 fixed-coupon OFZ bonds and 10 billion rubles of January 2025 Ruonia floaters.

Yields on five-year notes have gained 17 basis points in two days, the most since March 24, paring a rally that began after Britons voted to leave the European Union on June 23. Ten-year government bond yields also advanced for a second day after having shed 40 basis points in the wake of the referendum.

“Due to the drop in the oil price, Russian bonds started to retreat this week,” said Dmitry Dudkin, the head of research at UralSib Capital. “This isn’t the best timing for a debut sale" of September 2026 bonds.

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