Ruble Weakens Most Among Emerging Peers as Oil Reasserts Hold

  • Russian currency at lowest level since June 2 as crude slides
  • Barrel of oil in ruble terms near lowest level since April

The ruble weakened the most in developing-nation currencies as oil traded at its lowest levels in four months, spurring concern about the world’s biggest energy exporter’s ability to meet budget targets.

The Russian currency dropped 1.1 percent against the dollar to 66.67 by 7 p.m. in Moscow, its lowest level since June 2, as Brent crude declined on supply concerns. Brent in rubles, an indicator of how much the government earns from each barrel of oil it sells, traded near its lowest level since April and 10 percent less than the average price used to calculate the budget.

The impact of oil’s retreat is being compounded by flagging demand from Russian exporters for rubles after they paid monthly taxes and dividends. The currency is headed for its worst month since December, having depreciated 3.4 percent so far in July. It missed out on a rally in emerging-market peers Thursday after the Federal Reserve’s decision to keep interest rates on hold.

The ruble will weaken to 68 per dollar in the third quarter as oil reasserts its dominance and local support from the tax season ebbs, according to Societe Generale SA’s local unit Rosbank PJSC.

“Falling oil combined with the end of the tax period doesn’t bode well for the ruble,” said Yury Tulinov, head of research at Rosbank in Moscow. “The ruble is now following oil more closely."

Yields on five-year government bonds fell seven basis points to 8.77 percent. Local government bonds, known as OFZs, have brought investors a loss of 3.7 percent this month, the worst return since January. The Micex rose 0.8 percent to 1,954.45.

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