Report: Ruble set for best gain in three weeks as Citi says risks remain

MOSCOW, Jan 13 (PRIME) -- Russia’s ruble advanced for the first time in more than a week with oil, while Citigroup Inc. warned a “relief rally” may be short-lived, Bloomberg reported on Wednesday.

The currency gained 0.8% to 76.48 against the dollar by 1:15 p.m. in Moscow, the most on a closing basis since Dec. 23, as Brent crude climbed 2.4% to U.S. $31.60 a barrel. Bonds rose, with the yield on five-year government notes declining five basis points from a three-month high to 10.55%.

The ruble has slumped 3.7% this month, the third-worst performer among 24 emerging markets tracked by Bloomberg, as oil at 12-year lows sparked concern that Russia will struggle to contain its budget deficit. The country will consider a 10% reduction in fiscal spending, Finance Minister Anton Siluanov said in Moscow on Wednesday. Siluanov said he sees no need for measures to stabilize the ruble, including the sale of foreign currency from Treasury accounts.

“I am cautious to call an end to the ruble depreciation story,” said Ivan Tchakarov, a Moscow-based economist at Citigroup. “What we see today is probably a bit of a relief rally."

BUDGET FORECASTS

The price of Brent in rubles was at 2,393 on Wednesday, compared with a 2016 budget that was crafted based on oil at 3,165 rubles a barrel. That’s the least the country generates from a barrel of oil since 2010.

“Clearly the budget will be changed and based on lower oil prices,” Tchakarov said, referring to an original fiscal target for $50 a barrel. He forecasts the currency will strengthen to 72 over six to 12 months. “The currency will tend to be supported somewhat by the robust balance of payments and, at the end of the day, we do expect higher oil prices by year-end," Tchakarov said.

As bonds gained for the first time this week, the Finance Ministry plans to auction today 17.8 billion rubles ($233 million) in local-currency debt known as OFZs.

The MICEX Index of stocks added 0.4% to 1,697.

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