The ruble halted a two-day losing streak while Russian bonds and stocks boomed after oil prices edged past $60 per barrel, boosting investor confidence. Russia is the world’s biggest energy exporter, with revenues from such exports financing almost half its budget.
However, the ruble, which rose up to 1 percent to 62 versus the dollar, didn’t appreciate much after Morgan Stanley slashed Russian stocks, bonds and the currency to underweight, citing inflation risks arising from loose monetary policy.
Analysts at OAO Rosbank expect the ruble to trade close to 62.50 per dollar if the prices of Brent crude hover at around $60 per barrel. Though oil prices appreciated the most since 2009 last month, they have plummeted 41 percent over the past six months. The slump, coupled with sanctions imposed by U.S. and its allies over Ukraine, have worsened an economic recession and prompted two credit-rating agencies to cut Russian sovereign rating to junk status.
“The oil price has reached some relative stabilization at around $60 per barrel, supporting gains in Russia,” Vladimir Vedeneev, a Moscow-based chief investment officer at Raiffeisen Asset Management, told Bloomberg News. “Along with a truce appearing to take hold in Ukraine, these events have essentially been priced in.”
The ruble’s resurgence in February made it the best performing currency in emerging markets in Europe this year as ruble-denominated bonds returned the biggest earnings in emerging markets in February. The yield on the 5-year government bonds plunged 35 basis points to 14.22 percent on Tuesday. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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