Azernews.Az

By Bloomberg

The ruble weakened to a three-month low as Danske Bank A/S said the central bank will probably keep buying dollars to help offset the sliding price of oil, Russia’s main export.

The currency fell 0.6 percent to 57.2490 per dollar by 1:01 p.m. in Moscow, dropping for a third day after Brent crude sank 8.9 percent in the previous two days. A stronger ruble when oil is falling reduces the government’s revenue from exports in local-currency terms.

“The ruble’s decline is the natural response to deteriorating external conditions and as long as it’s not collapsing, the authorities should be fine with this weakening,” Vladimir Miklashevsky, a strategist at Danske in Helsinki, said in e-mailed comments. “The central bank may not even halt its dollar purchases, as it might be comfortable with relative ruble levels.”

The Bank of Russia started buying foreign currencies daily on May 13 to replenish its reserves, which helped the ruble weaken 14 percent since. With a barrel of Brent crude valued at 3,274 rubles, or 7 percent below the 12-month average price, the currency is “overbought” and has potential to weaken further, according to Yury Tulinov, an analyst at PAO Rosbank.

Russian government bonds fell, pushing yields on five-year notes up three basis points to a one-month high of 11.30 percent. The Micex Index of equities fell 0.5 percent in its third day of declines.

The nation’s crude and natural-gas industries account for about half of Russia’s budget revenue and Brent is trading almost 50 percent weaker than it was this time last year. 0il climbed 1.3 percent to $57.26 per barrel in London on Tuesday after slumping the most since February the day before amid concern the Greek debt crisis will hurt demand. Russia’s economy is expected to contract 3.5 percent this year in its first recession since 2009.