Bloomberg News

Ruble Weakens to Two-Year Low Against Dollar on Oil Decline

October 03, 2011

Oct. 3 (Bloomberg) -- The ruble depreciated against the dollar for a fourth day, dropping to the weakest close in more than two years as oil fell and as the period for exporters to convert dollar-denominated revenue to pay taxes ended.

Russia’s currency depreciated 1.1 percent to 32.595 per dollar at the 7 p.m. close, its weakest closing position since July 2009. It was little changed at 43.30 per euro, leaving it down 0.6 percent at 37.4123 against the central bank’s target dollar-euro basket.

Oil extended declines after its worst quarter since 2008 as concern grows that Europe’s debt crisis will hurt demand for the commodity in the euro area. European finance ministers meet today in Luxembourg to weigh the threat of a Greek default.

“For investors in Russia, it’s again a case of watching and waiting on global events,” Chris Weafer, chief strategist at Troika Dialog in Moscow, wrote in an e-mailed note yesterday. “The dominant mood in all markets is one of extreme nervousness, and markets everywhere are more prone to sharp set- backs.”

Crude for November delivery lost one percent to $78.42 a barrel before the ruble’s close, and last traded down 0.2 percent at $79.02 a barrel. Urals crude, Russia’s main blend, dropped 0.6 percent to 100.33 per barrel.

“Clearly there’s a correction in most commodities, so it looks like there’s another wave of risk-off,” Alexei Moiseev, VTB Capital’s chief economist in Moscow, said by phone. “One Russia-specific factor which doesn’t help is that the tax week is over -- there won’t be any more taxes paid until the 15th.”

VTB Capital expects the ruble to strengthen 5.1 percent to 31 per dollar by the end of 2011, Moiseev said.

Tax Payments

Exporters convert dollar-denominated revenue into rubles to pay taxes at the end of each month, buoying the Russian currency. Companies were due to pay about 1.5 trillion rubles ($46 billion) in taxes in the second half of September, Alfa Bank analysts wrote in a note Sept. 16.

Investors increased bets the ruble will depreciate further, with non-deliverable forwards showing it dropping to 33.147 per dollar in three months’ time, compared with 32.7855 Sept. 30. NDFs provide a guide to expectations of currency movements and interest-rate differentials.

“The ruble tends to underperform the rest of the region when risk sentiment is poor,” Dina Ahmad, a strategist at BNP Paribas SA in London, said by e-mail. “It’s difficult to see a lasting improvement in risk appetite.”

BNP Paribas forecasts the ruble will rally 3.9 percent to 36 against the basket by the end of this year, Ahmad said.

Russia’s only ruble Eurobond declined, pushing the yield up 24 basis points, or 0.24 percentage point, to 8.421 percent. Russia’s sovereign dollar bonds due in 2020 also fell, with the yield up six basis points at 5.269 percent.

--Editors: Stephen Kirkland, Gavin Serkin

To contact the reporter on this story: Jack Jordan in Moscow at

To contact the editor responsible for this story: Gavin Serkin at

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