Ruble intervention triggered by eighth day retreat to 2009 low

Russian rubles Russian rubles

June 1 (Bloomberg) -- The ruble tumbled for an eighth day to the lowest since 2009 against the dollar, prompting “intensive” central bank interventions as oil sank on worse- than-expected U.S. data.

The ruble slid 0.6 percent to 33.68 per dollar by the 7 p.m. close in Moscow, taking its fall since May 18 to 7.2 percent. The ruble lost 0.6 percent to 41.65 per euro and 0.6 percent to 37.2665 against the central bank’s target basket.

Oil dropped as much as 4.6 percent after U.S. companies added the smallest number of workers in a year and a gauge of Chinese manufacturing missed estimates. The central bank’s intervention levels are already “quite intensive,” Bank Rossii Chairman Sergey Ignatiev said today in comments broadcast on state television.

“We see further downside in the period ahead,” Benoit Anne, head of emerging-markets strategy at Societe Generale SA in London, wrote in an e-mailed note.

Bank Rossii manages the ruble within a so-called “floating corridor” against a basket of dollars and euros to limit swings that erode exporters’ competitiveness. At current levels, the bank may be selling $150 million to $250 million day in foreign currencies to boost the Russian currency, according to Anne.

Intervention Risks

“We are going to watch for rising intervention risks,” he said. “We are still far away from the level that would trigger a much heavier intervention.”

Investors increased bets on the ruble weakening, with non- deliverable forwards showing the currency at 34.265 per dollar in three months, compared with expectations of 34.0665 per dollar yesterday.

The ruble’s decline will probably slow even if oil continues to fall, Ignatiev said. The currency may correct as much as 3 percent to 32.7, according to Denis Korshilov, head of fixed income, currencies and commodities at Citigroup Inc. in Moscow.

“A big Russian customer order is believed to be behind this sharp move,” he said. The ruble “should correct to 32.5 to 32.7 soon after the order is done.”

Bloomberg News

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