Russia suspends exchange auction

The rouble slid to a five-week low as the Russian central bank suspended some foreign-exchange auctions, stepping up measures to counter this year’s biggest currency rally.

The rouble weakened 1.7% to 53.23 against the dollar yesterday in Moscow. It fell 1.2% last month, trimming this year’s advance to 14%.

Bank of Russia suspended the sale of one-year foreign-currency repurchase agreements yesterday, continuing a policy of restricting access to instruments that can be used to reinvest in higher-yielding ruble assets.

The central bank is having some success in suppressing the rouble after its first-quarter rally outstripped the rise in crude, threatening to worsen Russia’s budget deficit. Finance minister Anton Siluanov said last week that currency purchases, which the central bank began last month, show policymakers see the real rouble rate as balanced.

“The central bank wants to push investors towards buying dollars on the market,” said Artem Roschin of Aljba Alliance bank.

“The rouble will weaken on this, which is what the central bank wants.”

The central bank said it bought $200m (€183m) on May 28, taking purchases since May 13 to $2.33bn. Russia’s treasury also cancelled a $500m deposit auction.

A weaker rouble helps the budget because it boosts local-currency revenue from exports. The price of Brent crude, the benchmark for Russia’s biggest export, was the equivalent of 3,463 roubles a barrel yesterday, the highest since March 12.

Russia’s currency may face further downward pressure this month as domestic companies prepare to pay as much as $10.2bn of foreign debt in June, more than double last month’s level, according to central bank data.

Three interest-rate cuts totalling 450 basis points and a rebound in the rouble have helped drive demand for ruble bonds this year. Policymakers will probably lower the key rate by at least 100 basis points on June 15, according to Bloomberg survey, as they unwind an emergency increase to 17% in December.

Bloomberg