Azernews.Az

By Bloomberg

The ruble weakened as crude oil declined and investors speculated Russia’s central bank will cut rates more than economists predict tomorrow.

The ruble fell for the second time this week, slipping 0.5 percent to 51.8150 per dollar by 11:46 a.m. in Moscow, paring its advance this year to 17 percent. Five-year bonds rose, reducing the yield two basis points to 11.47 percent before the Finance Ministry offers 20 billion rubles ($387 million) of December 2017 floating coupon debt on Wednesday.

While economists forecast the Bank of Russia will deliver a 100 basis-point key rate cut on Thursday, the ruble rally and comments by officials last week fueled wagers policy makers may opt for a steeper reduction. Traders predict 130 basis points in cuts for the next three months, compared with 115 basis points a week ago, forward-rate agreements show.

“The recent ruble softness is mostly about the market feeling that the Russian authorities don’t want the ruble to appreciate too much,” Sebastien Barbe, Paris-based head of emerging-markets research and strategy at Credit Agricole CIB. “I think the central bank could do more than 100 basis points. The will to cap the ruble is another reason to cut.”

The stronger currency can hurt the competitiveness of Russian exporters and cut into budget revenue since the country relies on the oil and gas industries for about 50 percent of proceeds. Brent crude fell 0.5 percent to $64.33 a barrel.

“The majority among investors do not believe in further ruble strengthening, export flows are being exhausted for now, hence the consensus idea is to sell the ruble,” Alexey Pogorelov, the chief economist for Russia at Credit Suisse Group AG, said by e-mail from London. At the same time, a 150 basis- point cut is already priced into the market, he said. “Unless the central bank cuts aggressively I don’t think the ruble will weaken a lot.”

The Micex Index of stocks rose 0.3 percent to 1,683.59, while the RTS Index declined 0.2 percent to 1,027.63.