Ruble Falls to Record Before Rate Decision as EU Adds Sanctions
By Vladimir Kuznetsov September 12, 2014
The ruble weakened to a record for a second day as the European Union widened sanctions to include OAO Rosneft and other energy companies and Brent held below $100 a barrel. Bonds fell before an interest-rate decision.
The currency retreated as much as 0.6 percent to 37.7265 before trading 0.4 percent lower at 11.35 a.m. in Moscow, bringing this week’s loss to 2 percent. Ten-year local-currency bonds retreated for a fifth day, sending the yield up two basis points to 9.78 percent.
The EU’s expanded penalties target 15 companies, including barring Rosneft, OAO Gazprom Neft and OAO Transneft from securing financing with maturity of more than 30 days. The U.S. will “deepen and broaden” measures against Russia’s financial, energy, and defense industries, President Barack Obama said yesterday. Russia may ban some imports including clothing and used cars in retaliation, Dmitry Peskov, a spokesman for President Vladimir Putin, told Interfax yesterday.
“Market sentiment toward the ruble remains negative, and retaliatory measures from Russia seem certain,” Sberbank CIB analysts led by Tom Levinson, said in an e-mailed note. “Such trade restrictions damage both Eurozone and Russian growth prospects and will keep the euro and the ruble pressured.”
The yield on Rosneft’s Eurobonds maturing in March 2022 increased seven basis points to 6.85 percent, the highest in more than a week. The ruble lost 0.4 percent against the euro to 48.6530 and weakened 0.4 percent against the central bank’s basket of dollars and euros to 42.6011.
The central bank will announce the interest rate decision at 1:30 p.m. Moscow time. While 15 of 26 economists surveyed by Bloomberg expect the Bank of Russia will leave the one-week auction rate at 8 percent, 10 forecast an increase to 8.5 percent and one predicted a quarter-point tightening.
Policy makers have raised borrowing costs by 250 basis points since Putin’s incursion into Ukraine’s Crimea peninsula in March to stem the slide in the ruble. Brent gained 0.4 percent to $98.42 today, after falling to the lowest close since April 2013 two days ago.
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