Bloomberg News

Ruble Drops Most in Six Weeks Versus Dollar on Greece Referendum

November 02, 2011

Nov. 1 (Bloomberg) -- The ruble declined the most in six weeks against the dollar on concern plans to halt the European debt crisis will founder, threatening demand for Russia’s exports.

The currency lost 2.1 percent to 30.80 per dollar at the 7 p.m. close in Moscow, the sharpest daily retreat since Sept. 19. The yield on the country’s only ruble-denominated Eurobond surged the most in four weeks.

Oil, Russia’s chief export earner, lost 2.8 percent to $90.54 a barrel in New York after Greek Prime Minister George Papandreou said he will submit the European Union’s new financing deal for a national referendum, a gambit that risks pushing the country into default. The EU is Russia’s largest trading partner.

“After the rally last week, the ruble is now being undermined by renewed concerns about the eurozone,” Gaelle Blanchard, an emerging-markets analyst at Societe Generale SA in London, said by e-mail. “I don’t think we can be very bullish in the current environment. The uncertainties will not be cleared up overnight.”

The Russian currency jumped 4.5 percent against the dollar last week, its biggest weekly gain since February 2009, as investor appetite for riskier assets returned amid optimism the bailout plan would stem contagion.

Oil and metal prices sank after China’s Purchasing Managers’ Index fell for the first time in three months in October, stoking concern commodity demand will falter.

Under Pressure

“The Chinese data today was not supportive for commodity prices,” Blanchard said. “The ruble could be under pressure if data suggest a bleak picture for next year.”

Oil and natural gas account for about 17 percent of Russia’s gross domestic product and 40 percent of revenues.

Investors increased bets the ruble would weaken further, with non-deliverable forwards showing it at 31.2916 per dollar in three months’ time today, compared with 30.6495 yesterday.

Russia’s $3.5 billion of debt due 2020 fell, pushing the yield up eight basis points, or 0.08 percentage point, to 4.469 percent. The yield on the ruble Eurobond was 22 basis points higher at 7.396 percent, the biggest jump since Oct. 4.

“We’re likely to see continued ruble weakness this week if sentiment stays this way,” Carolin Hecht, a Frankfurt-based strategist at Commerzbank AG, said by e-mail. “Risk aversion and oil prices remain the main drivers behind ruble movements.”

--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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