Ruble Succumbs to Oil Selloff on Dimming Hopes for OPEC Accord

  • Crude drop reflects falling confidence for accord on output
  • Volatility in oil won’t neccesarily whipshaw currency: VTB

The ruble swung from gains to losses, buffeted between a selloff in oil and rallying emerging markets following Hillary Clinton’s dominance in a U.S. election debate.

The Russian currency was little changed at 63.9725 per dollar by 6:23 p.m. in Moscow, a day before an Organization of Petroleum Exporting Countries meeting to discuss a potential output freeze. Earlier it gained as much as 0.6 percent. Oil futures slid 3.3 percent to $45.78 per barrel.

An early rally faded on waning chances oil-producing nations will reach agreement on production in Algiers, according to Graham Stock, head of emerging-market research at Bluebay Asset Management, which oversees about $50 billion in London. Crude as a price driver of the ruble measured by its 30-day correlation fell to 0.71, from more than 0.77 on Sept. 13. A reading of one would indicate the two are in lockstep.

No Escape

"There’s no way to escape the pressure from oil prices, even if the correlation is not  perfect,” said Vladimir Miklashevsky, senior strategist at Danske Bank A/S in Helsinki.

Still, as long as oil remains in the $45-$50 per barrel range, the ruble’s sensitivity to its volatility remains "moderate," according to VTB Capital analysts. “The Russian currency market is likely to keep trading in a range-bound mode," strategists Maxim Korovin and Tatiana Chernyavskaya said in an e-mailed note.

The ruble’s early advance was the biggest in developing Europe. An election victory for Republican candidate Donald Trump is seen as negative for U.S. trade with developing nations, most of all Mexico.

"Russia is in a win-win situation,” Miklashevsky said. “If Trump wins, many people bet on the ruble. If Hillary leads, a bet is on emerging markets in general, and the ruble follows the lead.”

The Micex index of major stocks fell for a third day to 1,977, while the yield on Feb. 2027 government bonds rose four basis points to 8.25 percent.

— With assistance by Douglas Lytle

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