Azernews.Az

By Bloomberg

The ruble gained for the third day on speculation the government ordered companies to sell export revenue and as local taxes boost demand for the currency.

The ruble strengthened 0.7 percent to 55.4005 a dollar by 11:04 a.m. in Moscow. The dollar-denominated RTS Index rose 1.5 percent to 822.89 while the Micex Index climbed 0.3 percent to 1,441.20, led by OAO Lukoil and VTB Group.

The government has instructed five state-controlled exporters, including OAO Gazprom and OAO Rosneft to reduce their foreign exchange holdings by March 1 to levels that wouldn’t exceed those seen on Oct. 1, the Kommersant newspaper reported, citing a Dec. 17 directive from Prime Minister Dmitry Medvedev. This week’s corporate tax payments that Bank of America Corp. estimates at 500 billion rubles ($8.8 billion) are bolstering the ruble as last week’s interest-rate increase keeps squeezing money-market funding.

“A wave of ruble strengthening is still on,” Slava Smolyaninov, chief strategist at UralSib Financial Corp. in Moscow, said by e-mail. “The Kremlin’s call on exporters to buy rubles was apparently very well heard and accepted. Blend in the tax period and a perfect mixture for squeezing ruble bears out of the market is ready.”

The government is turning to exporters to convert more of their foreign revenue into rubles amid efforts to recover from the nation’s worst currency crisis since 1998. The yield on 5- year government bonds rose six basis points to 15.2 percent.

‘Exhausted’ Upside

Gazprom needs rubles for investments and understands that these actions help stabilize the exchange rate, Deputy Chief Executive Officer Alexander Medvedev told reporters in Moscow yesterday.

The ruble has rebounded 45 percent since tumbling to a record-low 80.10 a dollar on Dec. 16, driven in part by the cash crunch that developed after the Bank of Russia boosted its key interest rate to 17 percent from 10.5 percent that day.

The currency’s strengthening may be overdone as the price of Brent oil in ruble terms declined to the lowest since June 2013, according to ING Groep NV analyst Dmitry Polevoy. Crude fell to 3,288 rubles per barrel from an average of 3,753 in the last 12 months, data compiled by Bloomberg show.

“Even this simplified analysis shows that the ruble’s upside is probably exhausted, unless oil recovers further,” Polevoy said in an e-mailed note.