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25 September 2017
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Russian Ruble, Ukraine’s Hryvnia Jump as Gas Supplies Resume

The hryvnia strengthened...

Russia’s ruble and the Ukrainian hryvnia strengthened as OAO Gazprom resumed shipments of natural gas to Europe after a two-week shutdown, according to Bloomberg.

The ruble snapped a four-day decline against the euro and the hryvnia appreciated to its highest level versus the dollar in six days after Russia’s gas exporter said it will ship about 430 billion cubic meters of gas today. Currencies in eastern Europe pared declines.

“The lack of gas was creating a negative dimension for industry,” said Roderick Ngotho, an emerging markets currency strategist in London at UBS AG. “The resumption of gas means industry can do the best it can given the current downturn in external demand without the added negative of disruptions to energy flow.”

The hryvnia strengthened as much as 2.8 percent to 7.8500 per dollar, the highest since Jan. 12. The ruble was up 0.5 percent at 43.4059 per euro by 1:16 p.m. in Moscow. Russia’s currency earlier weakened against the euro as the nation’s central bank devalued the ruble for the fifth straight day.

The Hungarian forint recouped some losses after falling to a record low and was last 0.2 percent weaker at 285.85 per euro in Budapest. The Romanian leu fell 0.3 percent, the Polish zloty rebounded to 4.3282 per euro from 4.3348, and the Czech koruna pared an earlier drop of 0.6 percent, and last traded down 0.5 percent.

10-Year Accord

Gazprom and Ukraine’s NAK Naftogaz Ukrainy signed a 10-year natural gas agreement yesterday. Russian gas flows through Ukraine were halted Jan. 7, disrupting supplies to the European Union, after Gazprom accused Ukraine of siphoning off transit flows for its own needs, a charge the country denies.

Gazprom shares gained as much as 1.5 percent to 107.10 rubles in Moscow trading, after sliding as much as 2.6 percent before the announcement.

U.K. gas for delivery in February fell 2 pence, or 3.6 percent, to 53 pence a therm by 8:22 a.m. in London, according to broker ICAP Plc. Russia’s Micex stock index pared a decline of as much as 5.1 percent, dropping 0.8 percent to 582.22.

The extra yield investors demand to own Ukrainian bonds instead of U.S. Treasuries plunged by the most in 10 weeks, falling 1.39 percentage points to a seven-week low of 23.64 percentage points, according to JPMorgan Chase & Co.’s data. That compares with a 10 basis-point decline in JPMorgan’s main emerging-market bonds index to a week-low of 6.69 percentage points.

Russia’s 30-year government dollar bonds fell, pushing the yield 1 basis point higher to 9.39 percent.

VAT Payments

Higher demand for rubles by banks also supported the Russian currency today, according to Natalia Orlova, chief economist at Alfa Bank, Russia’s biggest privately owned lender. Banks need to pay as much as 150 billion rubles ($4.5 billion) in value-added tax to the government today, according to Moscow’s Trust Investment Bank. The central bank offered 20 billion rubles at its cash auction yesterday, less than a quarter of as much as 90 billion demanded, said Alfa’s Orlova.

“The liquidity squeeze is the main explanation for the strength we’re seeing in the ruble today,” she said. “One of the best way to stop capital outflows is to reduce liquidity and that seems to be what the central bank is doing.”

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