Ruble Drops From One-Year High as Citi Sees Limit to OPEC Impact

  • 5-year bond yield climbs for 6th day, longest streak in year
  • Rosneft has no plans to cut oil production, Reuters reports

The ruble weakened from a one-year high as increased bets for U.S. interest-rate hikes curbed demand for emerging-market assets and Citigroup Inc. said it was unlikely to benefit further from an OPEC output deal.

Russia’s currency lost 1 percent to 62.62 against the dollar by 6:18 p.m. in Moscow after strengthening beyond 62 on Monday as crude prices surged. Government bonds also retreated, sending five-year yields higher for a sixth day, the longest streak since August 2015, while the Micex Index of stocks was little changed.

Russian assets joined a decline in developing nations, caused by investors pulling funds from riskier markets on speculation a Federal Reserve rate increase is nearing. The International Energy Agency said on Tuesday that "the real work starts" now on the Organization of Petroleum Exporting Countries’ production cut and that “critical details” need to be worked out before a Nov. 30 meeting in Vienna.

The positive effect from the OPEC agreement “has already been taken into account, I don’t expect significant reaction even if they seal the deal formally,” said Ivan Tchakarov, an economist at Citigroup Inc. in Moscow.

Overbought Signals

The ruble’s advance on Monday, which brought its year-to-date gain to 18 percent, followed comments by President Vladimir Putin that Russia would join efforts by OPEC to stabilize oil, Russia’s main export earner. If OPEC and Russia are able to reach an agreement, Rosneft will “of course” comply, Rosneft spokesman Mikhail Leontyev said by telephone. Rosneft is skeptical OPEC will be able to reach a deal among its members, he said.

The currency’s 14-day relative strength index was at 38.8 on Tuesday, after falling to the lowest since April on Monday. The level of 30 signals that a currency is overbought and may weaken.

Market-based odds for higher U.S. interest rates this year rose four percentage points to 68 percent. The U.S. dollar jumped against all of its 16 major counterparts as Fed Bank of Chicago President Charles Evans said policy “may well be changing soon,” even as he argued for keeping interest rates low until core inflation moves higher.

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