The ruble fell for the first time in four days after separatists in Ukraine’s Donetsk region said they’ll proceed with a referendum, ignoring calls from Russian President Vladimir Putin to delay the vote. Stocks rose.
Russia’s currency lost 0.2 percent to 41.1592 against the central bank’s target basket of dollars and euros as of 5:43 p.m. in Moscow. The Micex Index of stocks added 0.6 percent, extending this week’s gain to 5.2 percent. Tomorrow is a public holiday in Russia.
The ruble erased earlier gains today after the so-called Donetsk People’s Republic said a May 11 referendum on whether to leave Ukraine will go ahead. Stocks and bonds rallied the most in seven weeks yesterday after Putin called on separatists in southern and eastern Ukraine to delay the vote and pledged to pull troops back from the country’s border. Today, Putin announced a full test of the nation’s military.
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“Investors wanted to believe that Putin was sincere that Russiawould do nothing to further escalate the conflict and would take steps to de-escalate,” Vyacheslav Smolyaninov, an equity strategist at ZAO UralSib Capital in Moscow, said by phone. “People realized after the Donetsk news that something else is going on behind the scenes.”
The ruble depreciated 0.3 percent against the dollar and was little changed versus the euro. The ruble is the second-worst performer among 24 emerging-market currencies this year against the greenback with a 6.1 percent loss.
Rally ‘Excuse’
Russia is testing its entire military’s combat readiness, Putin said today. The exercises have been planned since November, he said at the Defense Ministry in Moscow, where he watched the drills by video link.
Putin said yesterday violence in Ukraine must stop for any dialogue to begin and he backed the presidential election scheduled for May 25. That marked a change from what Russian Foreign Minister Sergei Lavrov said on May 6, when he called for a delay to the vote because of the Ukrainian unrest.
“Putin’s views on Ukraine have certainly not changed,” Viktor Szabo, who helps manage more than $12 billion at Aberdeen Asset Management Ltd., said in e-mailed comments. “I don’t see a substantial shift, but the market was looking for an excuse for a rally.”
Stocks are down 8.9 percent this year, compared with a 0.8 percent increase for the MSCI Emerging Markets Index. Shares on Russia’s benchmark gauge are valued at 0.67 times net assets, or book value, compared with 1.48 times for the MSCI emerging-markets gauge, data compiled by Bloomberg show.
Bonds maturing February 2027 rose for a fourth day, sending the yield seven basis points lower to 9.07 percent. The rate has fallen 60 basis points this week.
“This is very hot money with a very short-term horizon,” UralSib’s Smolyaninov said. “Any news can produce a bounce in Russia at the moment.”
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