Bloomberg News

Ruble Climbs Second Day Versus Dollar as Europe Spurs Risk Bets

October 24, 2011

Oct. 24 (Bloomberg) -- The ruble appreciated for a second day against the dollar as investors increased bets on riskier assets amid optimism Europe’s leaders will agree a plan to contain the debt crisis.

The Russian currency advanced 1.3 percent to 30.625 per dollar at the 7 p.m. close in Moscow, advancing for a second day and erasing last week’s 0.5 percent loss. The ruble strengthened 1.5 percent to 42.51 per euro, leaving it 1.4 percent higher at 35.9733 against the central bank’s target dollar-euro basket.

European leaders outlined plans to aid the region’s banks and ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund yesterday, a sign of progress in solving the sovereign debt crisis in Russia’s largest trading partner.

Tackling Europe’s problems will be the “most important market issue” for Russia for the remainder of 2011, Chris Weafer, chief strategist at Troika Dialog in Moscow, wrote in an e-mailed note today.

The ruble has advanced 5.2 percent against the dollar so far this month as oil, Russia’s chief export earner, climbed 13 percent. Crude for December delivery rose 2.8 percent to $89.89 a barrel in New York today.

Commodities rallied as reports today showed China’s manufacturing may grow in October for the first time in four months and Japanese exports increased more than expected in September.

Moody’s Cut

Investors pared bets that the ruble would weaken further, with non-deliverable forwards showing it at 31.0648 per dollar in three months, compared with 31.58 Oct. 21.

Russia’s $3.5 billion of sovereign debt due 2020 rallied, pushing the yield down five basis points, or 0.05 percentage point, to 4.595 percent. Dollar notes due in 2015 also rose, lowering the yield 11 basis points to 3.323 percent.

Moody’s Investors Service cut its outlook for Russia’s banking system to negative, saying lenders’ capital adequacy may fall below the legal minimum of 10 percent if Europe’s debt crisis worsens.

“Our adverse scenario for Russian banks, which is less probable than the central scenario, could materialize if things in Europe continue to deteriorate,” Eugene Tarzimanov, the Moscow-based senior analyst at Moody’s who wrote today’s report, said by phone. “This could lead to increased pressure on the ruble, on capital flight and a lower price for oil.”

--Editors: Alex Nicholson, Peter Branton

To contact the reporter on this story: Jack Jordan in Moscow at jjordan22@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net


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