Ruble Reverses Gains with Slide in Crude as Goldman Sees Support

Russia’s ruble resumed its decline as crude fell on speculation OPEC won’t succeed in reducing output, while Goldman Sachs Group Inc. said interest rates and a rebound in oil prices would support the currency.

The ruble dropped 0.5 percent per dollar to 62.98 as of 7:24 p.m. in Moscow, reversing a gain of as much as 0.3 percent and weakening for a second day. The currency trimmed its advance to 2.6 percent in the past month, the best performer in emerging markets, as Brent slipped 1 percent to $51.89 per barrel.

Oil is still is almost 6 percent stronger this month and rising crude prices could help the central bank resume rate cuts because a stronger currency slows the pace of inflation by reducing the cost of imports, Governor Elvira Nabiullina said in a Bloomberg Television interview in Moscow on Tuesday. Goldman’s Clemens Grafe pointed to Russia’s high rates relative to emerging-market peers and growing current-account surplus as factors offering support to the ruble.

Potential “shocks to the current account” and “interest rate differentials,” are influencing the exchange rate, Grafe wrote in an e-mailed note. “On both accounts the pressure in our view is currently towards a stronger currency.”

High returns on Russian assets are luring investors with an alternative to near-zero rates in much of the developed world. Buying rubles with cheaper-to-borrow dollars earned 3.4 percent in the past month, the best result in emerging markets, data compiled by Bloomberg show.

Nabiullina said inflows of speculative capital carry no “major, substantial risks.” Russia’s economy is suffering from limited access to international markets, she said, as a result of sanctions imposed by Europe and the U.S. after the annexation of Crimea in 2014.

Russia’s five-year government bonds fell, lifting the yield three basis points to 8.70 percent, the seventh day of gains. The Micex stock index fell 0.4 percent to 2,993.35.

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