The ruble weakened as crude oil fell and Royal Bank of Scotland Group Plc warned that traders are underestimating the chances of the Bank of Russia cutting rates on Friday.
The Russian currency slid 0.2 percent to 68.0980 against the dollar by 5:48 p.m. in Moscow. Oil, Russia’s main export earner, fell 1.1 percent to $49 a barrel in London. Government bonds advanced as the Finance Ministry placed 8.56 billion rubles ($126 million) of 10 billion rubles of bonds it offered in auctions today.
While RBS said its base case is for Bank of Russia Governor Elvira Nabiullina to keep the key rate on hold on Friday, it re-opened wagers on a weakening ruble to hedge against a possible 25 basis-point cut. That could provoke a “strong reaction” in the currency market, RBS economist for Russia & the CIS Tatiana Orlova said in an e-mailed note.
“Poor data from China, a bearish technical outlook for the oil price and heavy end-year external debt repayment schedule prompt us to revisit our short ruble trade,” London-based Orlova said. “The market somewhat underestimates the likelihood of the Bank of Russia opting for a token cut to support growth.”
All but three of 35 polled analysts expect the central bank to leave the key rate unchanged at 11 percent at Friday’s meeting. The biggest currency slump in emerging markets this quarter has raised the chances Nabiullina will end a string of five interest-rate cuts and keep the borrowing benchmark on hold.
Rates Horizon
The Finance Ministry sold all 5 billion rubles ($74 million) of May 2020 fixed-rate OFZ bonds at its auction Wednesday with demand of 16.5 billion rubles. It’s also placed 3.56 billion rubles of the 5 billion rubles of floating-rate bonds maturing January 2020 it offered in a second auction.
“The fixed-rate bond is looking more attractive on the horizon of one year compared to a floating-rate one as the central bank will continue its rate cuts,” Olga Sterina, an analyst at UralSib Capital in Moscow, said by e-mail.
original source: http://www.bloomberg.com/news/articles/2015-09-09/ruble-gains-mask-russia-rate-cut-threat-as-rbs-reopens-shorts