The ruble retreated for the first time in three days as concern that the U.S. deficit and an economic contraction in the euro region will derail the global recovery curbed appetite for riskier assets.
The ruble depreciated 0.2 percent to 31.7250 against the dollar by 7 p.m. in Moscow, extending its fourth weekly loss to 0.3 percent. The currency was 0.1 percent up versus the euro at 40.3999 and was little changed against the central bank’s euro- dollar target basket at 35.6287.
U.S. President Barack Obama holds negotiations today with Congress on reaching a deficit-reduction deal to avert $607 billion in automatic tax increases and spending cuts. The economy of the euro area, Russia’s biggest trade partner, slipped into recession for the second time in four years, a report showed yesterday.
“We saw non-residents reducing their long ruble positions,” Alexey Pogorelov, an economist at Credit Suisse AG in Moscow, said by phone. “Most market players expect the U.S. dollar to appreciate against currencies, which is happening in Russia and other emerging markets.”
Non-deliverable forwards showed the ruble at 32.2156 per dollar in three months compared with 32.1645 yesterday.
Pogorelov forecasts the ruble will weaken to beyond 32 per U.S. dollar by year-end partly because of continuous net private capital outflow. Capital flight reached $58 billion in the first nine months of this year, according to Bank Rossii data.
“The central bank was also reluctant to tighten its policy in November and those who were betting on the ruble as high- yield currency were disappointed,” he said. “Any further ruble strengthening would be very short-lived.”
Bank Rossii kept rates on hold on Nov. 9 after a surprise increase in September. Consumer-price growth slowed to 6.4 percent as of Nov. 6 from a year earlier, Bank Rossii said. That’s down from 6.5 percent in October.
The extra yield that investors demand to own Russia’s dollar bonds over U.S. Treasuries was unchanged at 204, according to JPMorgan Chase & Co.’s EMBI Global Index. An index of five-year government bond yields fell three basis points to 7.0459 percent.
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