Corporate Communications

Ruble Ends Three-Day Decline Versus Dollar on Oil, Tax Payments

22 April 2009

Bloomberg, April, 22, 2009

By Emma O’Brien

Russia’s ruble strengthened for the first time in four days against the dollar as oil traded above the government’s forecast for this year and companies converted foreign currency to make tax payments.

The ruble rebounded from its weakest level this month against the U.S. currency, strengthening 0.4 percent to 34.0371 per dollar by 5 p.m. in Moscow, as Urals crude, Russia’s chief export blend, traded at $47.91 a barrel, 17 percent above the government’s $41 average for this year. Russian banks and corporates need to make 304 billion rubles ($8.9 billion) in value-added, production and profit tax payments in the last two weeks of April, according to Moscow-based Alfa Bank.

“The ruble seems to be outperforming today with oil prices firmly above the government’s forecast,” said Manik Narain, an emerging-markets currency strategist in London at Standard Chartered Plc. “Tax payments are also always a factor towards the end of the month when it comes to the ruble.” Urals crude has jumped 12 percent since the end of January, bolstering the ruble and Russia’s energy-led economy, which the government says may contract 2.2 percent this year amid the global financial crisis. The central bank said it would end the ruble’s 29 percent six-month devaluation versus the dollar on Jan. 22, pledging to prevent further depreciation beyond a key level as long as Urals didn’t fall to and stay at $30 a barrel.

The ruble also added 0.6 percent to 43.9922 per euro today, helping send Russia’s currency up 0.5 percent to 38.5062 against its target basket, which is used by policy makers to limit currency swings that disadvantage Russian exporters. The basket is made up of about 55 percent dollars and the rest euros.

Tax Payments

Banks and companies will be converting foreign-currency holdings into rubles this week and next to pay taxes, said Narain, who predicts the ongoing global malaise will still see the ruble trading around 40.2 against the basket by the end of the year.

The ruble could strengthen to 33 per dollar should oil stay around $50 a barrel and the euro’s rate to the dollar stabilizes at today’s level of 1.3012, Yuri Soloviev, chief executive officer of VTB Capital, the investment banking arm of Russia’s second-largest bank, said in an interview from London today. “It has definitely reached fair value against the basket,” he said.

The ruble may be strengthening today because investors believe the 1.7 percent drop versus the dollar over the past three days was “overdone,” said Stanislav Ponomarenko, chief economist in Moscow at ING Groep NV. “There is not a strong view out there in the market that the ruble is going to weaken significantly again.”

Investors see the ruble 2.8 percent weaker at 35.01 per dollar in three months time, from 35.25 yesterday, according to non-deliverable forwards. NDFs are a guide to exchange-rate expectations as they fix a currency at a particular level in the future as a hedge against fluctuations.

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