Bloomberg News

Ruble Drops, Trims Best Monthly Rally Since 2009 on Oil, Europe

November 01, 2011

Oct. 31 (Bloomberg) -- The ruble declined the most against the dollar in more than a month, trimming its biggest monthly rally since 2009, as oil fell and concern deepened Europe will struggle to raise funds to stem the region’s debt crisis.

The Russian currency lost 1.6 percent to 30.16 per dollar by the 7 p.m. close in Moscow, the biggest daily depreciation since Sept. 22. The ruble has gained 6.9 percent in October, the first monthly advance since July and the strongest since May 2009. The ruble was little changed at 42.18 per euro, leaving it down 0.8 percent at 35.569 against the central bank’s target dollar-euro basket.

Crude, which along with natural gas accounts for 17 percent of Russia’s gross domestic product, lost 0.9 percent to $92.53 a barrel in New York crude futures trading. Stocks fell in Europe and the U.S. after the official Xinhua news agency said yesterday China can’t play the role of “savior,” following last week’s agreement by European leaders to boost the region’s bailout fund.

“The main driver” for the Russian currency and equities will be “the mood and trend in global markets,” Chris Weafer, chief strategist at Troika Dialog in Moscow, wrote in an e- mailed note. “On the negative side is the growing fear that the European Union deal may still not be effectively implemented.”

Investors increased bets the ruble will weaken further, with non-deliverable forwards showing it dropping to 30.6375 per dollar in three months, compared with 30.1525 on Oct. 28.

“European policy makers are treading in black swan territory -- they need to close the proposed measure and halt contagion,” Peter Rosenstreich, chief currency analyst at Swissquote Bank SA in Geneva, said by e-mail. “The market had two full days to digest and dissect the measure, and they found lots of holes.”

Russia’s $3.5 billion of bonds due 2020 rose, pushing the yield down three basis points, or 0.03 percentage point, to 4.365 percent. Domestic ruble notes due 2017 fell, sending the yield 19 basis points higher to 8.1 percent.

--Editors: Alex Nicholson, Gavin Serkin

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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