BLBG: Ruble Climbs Most in Week Against Dollar on Oil Gains, Free Float Moves
The ruble gained the most in a week against the dollar and ended two days of declines against the central bank’s target basket as oil prices reached a five-month high and the regulator moves closer to a free float.
Russia’s currency jumped as much as 0.8 percent to 29.8751 per dollar today, the most since Oct. 7. It was little changed at 35.4522 by 1:38 p.m. in Moscow against the dollar-euro basket, which Bank Rossii uses to manage swings in the ruble that erode exporter competitiveness.
The price of oil, Russia’s chief export earner, rose as much as 1.3 percent to $84.12 a barrel in New York today, the strongest since May 4 amid expectations supply will decrease after an industry-funded report showed U.S. crude stockpiles fell. Bank Rossii widened the so-called floating corridor it uses to guide the ruble yesterday as it seeks “increased flexibility” in the exchange rate, according to First Deputy Chairman Alexei Ulyukayev.
“Sentiment is good and there’s no huge downward pressure on the ruble,” Alexey Moiseev, chief economist and head of research at VTB Capital, the investment banking arm of Russia’s second-largest bank, said in a phone interview in Moscow today. Bank Rossii is “using this small window of opportunity to increase the ruble’s flexibility, it’s very smart.”
Pursuing Free Float
Russia is pursuing its target of a free floating ruble by 2012 even as other emerging markets step up currency controls in a bid to restrict speculative inflows amid what Brazil’s Finance Minister Guido Mantega calls a “currency war.” The world’s largest energy exporting nation is moving in the “opposite” direction to countries that have increased interventions or imposed capital controls including Brazil, South Africa and South Korea, Finance Minister Alexei Kudrin said in Moscow today.
The ruble’s trading corridor was expanded from 3 rubles to 4, Ulyukayev said yesterday while declining to specify its parameters. The band is now 32.9 to 36.9 against the basket, from the previous 33.4 to 36.4, according to Vladimir Osakovsky, Moscow-based economist for UniCredit SpA, Italy’s largest bank.
While record demand for emerging-market bonds is bolstering flows into other developing countries, Russia saw capital outflow of $4.2 billion last quarter and will receive inflows in “single digits” in the fourth, according to Ulyukayev. Capital inflows won’t recover until the start of 2011, Deputy Economy Minister Andrei Klepach said today in Moscow.
Privatizations Test Policy
Should inflows of capital in to Russia recover, the central bank’s flexible ruble policy could be tested, Simon Quijano- Evans, head of emerging-market strategy at Credit Agricole Cheuvreux in Vienna, wrote in a note to clients today.
“The likelihood of foreign direct investment flows rises with the government’s privatization plans,” he said.
Russia plans to raise $50 billion selling assets over the next five years to help fund a budget gap the government expects to reach 5.3 percent of gross domestic product this year. Stakes in the two largest banks, OAO Sberbank and VTB Group, will be put up for sale.
Investors pared bets for a weaker ruble today, with non- deliverable forwards showing the currency at 30.1430 per dollar in three months, from a 1 1/2-week high of 30.3052 yesterday. The contracts, known as NDFs, are a way of gauging the likely direction of currencies as they allow companies to hedge against exchange-rate fluctuations and foreign investors to speculate.
Options Traders Bullish
Options traders remain bullish on the ruble, with the currency’s one-week risk reversal rate -- the premium of put options over calls -- at 0.5 percent for a third day, from as high as 2 percent last week, according to data compiled by Bloomberg. The ruble is the European developing-nation currency that traders are most bullish on, apart from the Turkish lira, one-week risk-reversal rates show.
Prospects of further easing in U.S. monetary policy and the dollar’s 3.2 percent slide against the euro this month have spurred yields on Russian government Eurobonds to record lows. The yield on Russia’s dollar bonds due 2020 declined for a fourth day, to 4.10 percent, the lowest since the notes were first sold in April. Dollar bonds maturing 2015 yielded 2.91 percent today, breaking 3 percent for the first time yesterday.
To contact the reporters on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net; Maria Levitov in Moscow at mlevitov@bloomberg.net
To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net
