The ruble weakened to a record for the fifth day on concern Russia will quicken its move to a free float after more than $20 billion of currency interventions this month failed to halt the depreciation.
The currency slid 0.7 percent to 47.7384 against the central bank’s target dollar-euro basket by 12:28 p.m. in Moscow, bringing this year’s decline to 19 percent. Ten-year government bonds approached a five-year low before the Finance Ministry announces terms for a debt auction after scrapping sales in the past two weeks.
The Bank of Russia boosted foreign-currency sales this month, with the most-recent data showing it sold $2.44 billion on Oct. 24, as it sought to slow the ruble’s decline amid a dollar shortage exacerbated by sanctions over the Ukraine conflict and dropping oil prices.
The ruble’s decline is stoking speculation that the central bank will decide to abandon interventions as early as Oct. 31, when policy makers meet to decide on interest rates, according to Sberbank CIB.
“Price action is being increasingly driven by the fear that the central bank could scrap entirely its defense of the ruble, allowing it to freely float and find a natural level,” Tom Levinson, the chief foreign-exchange and interest-rates strategist at Sberbank CIB, said in an e-mailed note.
The intervention policy “is failing to halt the ruble’s decline, but is also feeding currency weakness by raising concern over the pace at which foreign-currency reserves are being eroded.”
Currency Interventions
Russia has been moving toward adopting a free float by 2015. The country’s foreign currency reserves declined $68 billion this year to $443.8 billion, the lowest since 2010, as of Oct. 17. One-month implied volatility for the ruble climbed to 16.27 percent, the highest level since June 2012.
After yesterday’s 1 percent depreciation against the basket, the central bank lowered the floor on its trading band by 35 kopeks to 47.40, according to a statement on its website today. The ruble has weakened by more than 30 kopeks more from this level today.
When the ruble falls past the boundary, the Bank of Russia spends $350 million to defend it before shifting the band by 5 kopeks, according to its guidelines. It repeats the process each time the currency falls by 5 kopeks.
Oil, which along with natural gas accounts for half of budget revenue, has fallen more than 26 percent in London from this year’s high in June. Brent crude declined as much as 0.8 percent to $85.15 per barrel today.
Investors wary that the central bank will abandon interventions “prefer to stack up foreign currency before the central bank leaves the currency market completely,” Alexei Egorov, an analyst at Promsvyazbank in Moscow, said in an e-mailed note.
The yield on Russia’s 10-year bonds climbed seven basis points to 9.95 percent today, two basis points away from a five-year reached on Oct. 14.
bloomberg.com
The currency slid 0.7 percent to 47.7384 against the central bank’s target dollar-euro basket by 12:28 p.m. in Moscow, bringing this year’s decline to 19 percent. Ten-year government bonds approached a five-year low before the Finance Ministry announces terms for a debt auction after scrapping sales in the past two weeks.
The Bank of Russia boosted foreign-currency sales this month, with the most-recent data showing it sold $2.44 billion on Oct. 24, as it sought to slow the ruble’s decline amid a dollar shortage exacerbated by sanctions over the Ukraine conflict and dropping oil prices.
The ruble’s decline is stoking speculation that the central bank will decide to abandon interventions as early as Oct. 31, when policy makers meet to decide on interest rates, according to Sberbank CIB.
“Price action is being increasingly driven by the fear that the central bank could scrap entirely its defense of the ruble, allowing it to freely float and find a natural level,” Tom Levinson, the chief foreign-exchange and interest-rates strategist at Sberbank CIB, said in an e-mailed note.
The intervention policy “is failing to halt the ruble’s decline, but is also feeding currency weakness by raising concern over the pace at which foreign-currency reserves are being eroded.”
Currency Interventions
Russia has been moving toward adopting a free float by 2015. The country’s foreign currency reserves declined $68 billion this year to $443.8 billion, the lowest since 2010, as of Oct. 17. One-month implied volatility for the ruble climbed to 16.27 percent, the highest level since June 2012.
After yesterday’s 1 percent depreciation against the basket, the central bank lowered the floor on its trading band by 35 kopeks to 47.40, according to a statement on its website today. The ruble has weakened by more than 30 kopeks more from this level today.
When the ruble falls past the boundary, the Bank of Russia spends $350 million to defend it before shifting the band by 5 kopeks, according to its guidelines. It repeats the process each time the currency falls by 5 kopeks.
Oil, which along with natural gas accounts for half of budget revenue, has fallen more than 26 percent in London from this year’s high in June. Brent crude declined as much as 0.8 percent to $85.15 per barrel today.
Investors wary that the central bank will abandon interventions “prefer to stack up foreign currency before the central bank leaves the currency market completely,” Alexei Egorov, an analyst at Promsvyazbank in Moscow, said in an e-mailed note.
The yield on Russia’s 10-year bonds climbed seven basis points to 9.95 percent today, two basis points away from a five-year reached on Oct. 14.
bloomberg.com
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