Ruble Gains Versus Currency Basket, Government Bonds Rise on Crude Rebound

The ruble strengthened against the currency basket used to manage its fluctuations and Russia’s dollar bonds gained as oil, the country’s largest export earner, snapped a four-day sliding streak.

Russia’s currency gained 0.1 percent to 34.3869 against the euro and dollar basket. Eurobonds due 2020 rose, pushing the yield 1 basis point lower to 4.64 percent.

Crude jumped as much as 0.7 percent to $75.95 a barrel in New York, paring back last week’s 6.6 percent slide, the most in six weeks. Oil gained amid speculation a report this week will show U.S. factory production and housing starts rose last month, easing concerns about the recovery of the world’s largest economy.

“It’s obviously good for Russia when the oil price goes up,” said Neil Shearing, a senior emerging markets analyst in London at Capital Economics Ltd. “You get a rise in capital flows into the country and the value of exports goes up.”

Russia’s central bank manages the ruble against the dollar- euro basket to limit swings that hurt exporters. The basket is calculated by multiplying the ruble’s rate to the dollar by 0.55, the euro-ruble rate by 0.45, and adding them together. The currency was little changed at 30.5451 per dollar by 1:01 p.m. in Moscow, and 0.2 percent stronger at 39.0825 per euro.

Investors reduced bets that the ruble will weaken, with non-deliverable forwards showing the currency at 30.7566 per dollar in three months, the strongest since Aug. 11. The contracts, known as NDFs, are a way of gauging market expectations of a currency’s movements as they allow companies to hedge against possible fluctuations in an exchange rate and foreign investors to speculate on currencies in countries that limit their participation in the markets.

Supported by Exporters

The ruble is also being supported by exporters converting their foreign currency earnings into Russian currency to pay taxes this week, said Denis Korshilov, head of foreign exchange trading at Citigroup Inc. in Moscow. Companies will pay 202 billion rubles ($6.6 billion) in pension and social taxes today, and 98 billion rubles in value-added tax by Aug. 20, according to data from Alfa Bank, Russia’s largest non-state lender.

Bank Rossii confines the ruble to a so-called floating corridor of 33.40 to 36.40 versus the basket by buying and selling foreign currency, First Deputy Chairman Alexei Ulyukayev said June 29. The ruble is currently regarded as a “dirty float” because of this activity, Shearing said.

The ruble will weaken more than 9 percent versus the dollar by the end of the year as the global economic recovery falters, pushing oil prices to $60 a barrel, Shearing said. “We’ve still got a bearish view and so see falls in the ruble.”