The ruble pared its third monthly gain as oil slid and Russia’s economy grew at a slower pace than forecast. A rally in local-currency debt waned as bondholders awaited President Vladimir Putin’s pick for the central bank chief’s successor.
The ruble dropped less than 0.1 percent to 30.0325 against the dollar by 7 p.m. in Moscow, giving it a 1.2 percent advance this month. The currency dropped for a second day to the euro, losing 0.1 percent to 40.7525. Those movements left it 0.1 percent weaker against the central bank’s target basket at 34.8576 and little changed in the month.
Crude oil, Russia’s main export, lost as much as 1.1 percent to $95.84 and headed for its first decline in four days in New York. The economy of the world’s biggest energy exporter expanded last year at the weakest pace since a 2009 contraction after record oil prices failed to offset $56.8 billion of net capital outflows and investment sagged.
February will be a “tense” month on the local foreign exchange market with debt ceiling negotiations in the U.S. determining demand for riskier assets, including the ruble, Ruslan Tongiev, head of financial markets operations at OAO Promsvyazbank, said by phone from Moscow.
The yield on government ruble debt due March 2018 rose three basis points to 6.20 percent, paring its drop in the month to 33 basis points. First Deputy Prime Minister Igor Shuvalov said the shortlist for Bank Rossii chief Sergey Ignatiev’s replacement has been compiled and submitted to Putin.
“We are waiting for the successor,” Dmitry Igumnov, head of fixed income trading at BCS Financial Group, said by e-mail.
Putin is selecting the next central bank’s chief from three main candidates: former finance minister Alexei Kudrin, the central bank’s First Deputy Chairman Alexei Ulyukayev, and Mikhail Zadornov, the head of VTB Group’s retail-lending unit, according to three officials with knowledge of the talks who declined to be identified because the matter isn’t public.
Russia will see lower interest rates as inflation decelerates, Ignatiev told a government meeting today in response to Putin’s concern that borrowing costs may slow the recovery.
Bank of America Merrill Lynch analysts recommended buying Russian government ruble debt “as monetary policy eases and inflation structurally shifts lower,” singling out notes due March 2018.
Yields on longer maturity ruble debt will fall to 6 percent to 6.5 percent by the end of the year amid “fresh” demand for the so-called OFZ bonds from foreigners when international banks are given access to settle deals, according to Sberbank CIB analysts.
Direct settlement through Euroclear Bank SA may come in early February, bringing inflows of $10 billion to $15 billion in 2013, they wrote in an e-mailed note.
“The anticipation of Euroclear and export revenue sales speak in favor of a strengthening ruble,” Promsvyazbank’s Tongiev said. He forecasts the ruble will trade within a band of 29.70-30.70 rubles per dollar next month.
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