Ruble Moves Least in Step With Oil in Year on Tax Payment Boost

  • Companies are due to pay 1.1 trillion rubles of tax next week
  • Currency advances almost 1% this week as Brent crude slips

Russia’s ruble is moving the least in step with oil in more than a year as demand from exporters preparing to pay $18 billion of taxes sent the currency toward a weekly gain.

The 120-day correlation between crude, Russia’s main export earner, and the ruble dropped to 0.60 this week, the lowest since September 2015. A reading of 1 would mean the two assets move in tandem. The currency was little changed at 62.53 per dollar by 6:21 p.m. in Moscow, bringing its advance in the past five days to 0.7 percent as Brent crude dropped in the period.

The divergence shows that the pick up in demand for higher-yielding Russian assets is leading investors to look beyond fluctuations in oil in determining the outlook for the ruble, which outperformed all peers in the developing world in the past month other than Mexico’s peso. This week, Russian companies sold dollars to prepare to pay 1.1 trillion rubles ($17.6 billion) in tax payments coming due before month-end.

“Companies no longer wait for the tax deadline to buy rubles, they pile up on cash ahead of time,” according to Artem Roschin, a currency trader at Aljba Alliance LLC in Moscow. At the same time, the break with oil is likely to prove fleeting, he said. “It’s possible that once the tax period is over, the correlation between oil and the ruble will get stronger."

While Brent crude traded 0.4 percent higher at $51.59 a barrel on Friday, it’s on course for its first weekly retreat since September as investors await clarity on whether the Organization of Petroleum Exporting Countries will be able to implement an accord to reduce output when they gather at an official meeting in November.

Local-currency Russian bonds also attracted investors this week, with yields on 10-year government notes falling four basis points to 8.36 percent on Friday. The Micex Index of stocks was little changed on Friday and was set for a second weekly drop.

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