Ruble Falls As Currency Near Central Bank Intervention

The ruble weakened to a record, approaching the level at which Russia’s central bank said it would step in to support the world’s worst-performing currency this quarter.

The ruble fell 1 percent to 44.3117 versus the central bank’s target basket of dollars and euros at 3:11 p.m. in Moscow. That’s within 0.2 percent of the 44.40 threshold that would prompt the monetary authority to begin buying rubles according to its policy guidelines. Ten-year government bonds retreated, lifting the yield six basis points to 9.38 percent.

Policy makers last intervened in May, bringing to $40 billion the amount Russia sold this year to counter an exodus from local assets that accelerated after President Vladimir Putin annexed Ukraine’s Crimea region in May. Russian companies are set to face dollar-funding stress as $35 billion of debt matures in December, while U.S. and European Union sanctions over the Ukraine conflict propel outflows, Morgan Stanley analysts wrote in a Sept. 26 note.

“The market is getting closer to panic,” Dmitry Polevoy, the chief economist at ING Groep NV in Moscow, said in an e-mailed note. “The ‘ghost’ of peak external debt payments in September and December is the most often-cited enemy of the ruble. The attempt to test 44.40 looks well grounded.”

The central bank widened the ruble’s trading band in August as it prepares for the shift to a freely floating ruble that would favor using interest rates rather than tapping reserves to control currency movements and manage inflation. It has no daily limit for the size of its interventions and shifts the boundary by 5 kopeks every time it sells $350 million, according to the Bank of Russia’s guidelines.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza