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Ruble Reaches 10-Month High as Crude Price Surges, Putin Sells Ruble Debt

25 Oct 2012
hit a 30-month high and foreign investors sought out the currency to buy government debt.

Russia’s currency was up 0.9 percent at 29.0101 per dollar by the 5 p.m. close of trading in Moscow, the strongest since April 14, according to data compiled by Bloomberg. It also gained for the first day this week against the central bank’s dollar-euro basket, adding 0.5 percent to 33.9421, the strongest close in a week.

Brent crude, Russia’s biggest export earner, surged as much as 7.7 percent to $119.79 a barrel, the highest since August 2008, as the political uprising in Libya reduced supplies from Africa’s third-biggest producer. The Russian government is selling its first-ever ruble bonds to international investors today, with the seven-year notes to yield 7.85 percent, according to a banker with knowledge of the deal.

“The ruble is well-positioned to outperform with the sharp rise in oil prices,” Benoit Anne, head of global emerging-markets strategy at Societe Generale SA, France’s second-largest bank, said by e-mail from London. The government’s debut ruble Eurobond will also “indirectly boost demand for the ruble,” he said.

Russia is selling the ruble debt at a rate of 29.0829 per dollar, according to a fund manager buying the bonds who declined to be identified because he’s not authorized to talk to media.

The ruble weakened 0.2 percent to 39.97 per euro. Trading was closed for a Russian public holiday yesterday.

Tunisia, Egypt

Brent has climbed 21 percent this year as protests that spurred the ouster of dictatorships in Tunisia and Egypt spread throughout the Middle East. Opposition forces have taken control of cities in Libya’s oil-rich east while leader Muammar Qaddafi has consolidated power in the capital Tripoli.

Russia’s central bank buys and sells foreign currency to keep the ruble within a so-called “floating corridor” against the basket to protect exporters from swings in the currency. The corridor has been “roughly” 33 to 37 since the start of the year, Bank Rossii’s First Deputy Chairman Alexei Ulyukayev said Feb. 11. The basket rate is calculated by multiplying the dollar-ruble rate by 0.55, the euro-ruble rate by 0.45, then adding them together.

The ruble was also supported by Finance Minister Alexei Kudrin, who said in a BBC Television interview broadcast today the central bank needed to take “additional measures” to curb inflation, said Peter Rosenstreich, chief market analyst at Geneva’s ACM Advanced Currency Markets.

Yield Appeal

The indication that Russia may raise benchmark interest rates, thereby boosting the relative yield appeal of ruble-denominated assets, has contributed to the currency’s oil-led advance today, he said by e-mail.

While Russia’s refinancing rate will stay on hold at a record-low 7.75 percent, Bank Rossii will likely raise the rate charged on overnight deposits held with the central bank at its meeting tomorrow, according to the median estimate of 18 economists surveyed by Bloomberg. The central bank increased the deposit rate to 2.75 percent at its Dec. 24 meeting.

The ruble will be 0.4 percent stronger at 33.80 against the basket by the end of March and remain there until the end of June, according to the median of at least 17 analysts’ forecasts in a separate survey.

Russia’s foreign-currency reserves rose $1.3 billion last week to a three-month high of $487.4 billion, according to central bank data published today.

The euro’s 1 percent advance against the dollar last week contributed to most of the increase as the stockpile is made up of about 41 percent euros, Vladimir Osakovsky, a Moscow-based Russia economist at UniCredit SpA, said by e-mail. Currency purchases by Bank Rossii to stem the ruble’s gains also contributed, he added.

Buying Dollars, Euros

The central bank is buying about $200 million of dollars and euros each day, said Denis Korshilov, head of foreign-exchange trading at Citigroup Inc. in Moscow.

Ruble-denominated government debt due August 2016 fell for a third trading day, lifting the yield by 4 basis points to 7.63 percent. The yield on sovereign dollar bonds maturing in 2020 fell 3 basis point to 5.09 percent. Dollar debt due 2015 gained for a fourth day, with the yield 6 basis points lower at 3.63 percent.