Ruble pares weekly gain as Sberbank sees weakness on oil decline
By Bloomberg
The ruble fell as oil headed for its first weekly decline in more than a month, prompting Russia’s largest bank to predict the rally in this year’s best-performing currency is losing steam.
The ruble weakened 0.8 percent to 50.71 against the dollar as of 3:04 p.m. in Moscow. It’s still on track for a 1.9 percent gain this week even as Brent crude heads for 1 percent slide to $65.81 a barrel. The ruble’s gains won’t be sustained and oil’s weakness could pull it down to as low as 52.50, according to OAO Sberbank.
“Its performance has been very impressive this week,” Tom Levinson, the chief currency and rates strategist at Sberbank CIB, the investment unit OAO Sberbank, said in e-mailed comments. “I find it remarkable that the ruble is at the same level as when Brent was $4 per barrel higher. Ultimately, we do not think that ruble can hold this level.”
The ruble has rallied 20 percent this year, aided by a 41 percent rebound in Brent crude from a six-year low in January. Russia, the world’s largest energy exporter, gets half of its revenue from the oil and natural-gas industries. The last time oil traded above $70 was in early December, when the ruble was just under 54 per dollar.
Levinson said that while dollar sales from exporters boosted the currency earlier this week, oil prices will determine the course from now on.
The yield on the government’s ruble bonds due February 2027 rose three basis points to 10.40 percent on Friday, down 18 basis points for the week. The Micex Index of stocks added 0.4 percent, heading for third weekly increase.
Debt Redemptions
The ruble’s current levels are justified given the average prices of oil, VTB Capital, the investment unit of the second- largest Russian lender VTB Group, said. Russian companies are coping well with repaying their external debt despite being shut out of foreign capital markets by international sanctions, analysts Maxim Korovin and Tatiana Zueva said in an e-mailed note.
However, currency investors will watch rising external-debt redemptions next month to gauge any increase in dollar demand, they said.
“In terms of external debt redemptions, April and May were the lightest months, while in June, the amount of external debt due rises 2.5-3 times from the May figures,” the analysts wrote.
Russian borrowers are due to repay $10.7 billion of external debt in June compared with $5.1 billion in May, according to data from the Bank of Russia.