May 8 (Bloomberg) -- Russia’s ruble climbed against its target currency basket, extending a record run of weekly gains, as surging oil prices and rising stocks spurred policy makers to let it strengthen.

The currency jumped 1.1 percent to 37.5018 versus the basket this week, headed for its 11th week of gains, the longest rally since the central bank introduced the dollar-euro basket in 2005 to limit swings that disadvantage Russian exporters. Oil, the nation’s chief export earner, rose the most in almost two months this week, while Moscow’s Micex stock index snapped two weeks of declines.

Bank Rossii bought as much as $4.5 billion of foreign currency so far this week in managing the ruble’s ascent, and has progressively moved the level at which it buys foreign currency to 37.50 versus the basket today from 37.80 on May 4, said Evgeniy Nadorshin, senior economist at Trust Investment Bank in Moscow, citing traders.

“The oil price is booming and risk appetite for emerging markets is increasing which is all positive for the ruble,” said Vladimir Osakovsky, an economist based in Moscow for UniCredit SpA, Italy’s largest bank. “The central bank is trying to let the ruble follow the market trend but they are intervening to prevent excessive volatility.”

The ruble, which lost 35 percent against the dollar between August and January, has been reversing that decline since the central bank pledged on Jan. 22 to defend the currency at the 41 level. A 22 percent jump in the price of Urals crude, Russia’s chief oil export blend, higher interest rates and limits to refinancing that deterred bets against the currency helped the ruble regain 10 percent versus the dollar over the past three months.

Oil Gains

Against the basket, which is made up of about 55 percent dollars and the rest euros, the ruble gained 0.2 percent to 37.5018 by 12:27 p.m. in Moscow. It rose 0.2 percent versus the dollar to 32.5140, poised for a 1.6 percent advance this week, the biggest weekly gain since the five days ended March 20. The ruble was little changed at 43.6115 per euro today, adding 0.6 percent in the week.

Oil in New York jumped 1.1 percent to $57.34 a barrel today as improved unemployment reports in the U.S. and Australia and expanding manufacturing in China boosted speculation the global economy may be starting to recover from the financial crisis. The Micex added 0.9 percent to 1,020.62, led by VTB Group, Russia’s second-largest lender, and oil producer OAO Lukoil.

The ruble could strengthen as much as 7.1 percent versus the basket to 35 by the end of the year as the economy stabilizes and oil prices average around $44 a barrel, Alexei Ulyukayev, the central bank’s first deputy chairman, said last month.

Emboldening Bank

UniCredit’s Osakovsky sees the ruble at 40 versus the basket by the end of the year, closer to the threshold the central bank pledged to defend in January.

“This strengthening is a short-term market trend as Russia’s economy is still doing quite badly,” he said. “Ruble volatility is likely to persist.”

The jump in oil prices may embolden the central bank to allow the ruble to strengthen beyond 37.50 later today Trust Investment’s Nadorshin said. “We have already seen them change their level during the day yesterday so this may just be temporary.”

Investors are also paring bets on the ruble’s drop, with non-deliverable forwards showing the currency at 33.30 per dollar in three months, from as weak as 39.08 on Feb. 2. In a week, the ruble should be little changed at 32.56 per dollar, according to NDFs, from this year’s low of 36.66 on Feb. 18. NDFs are a guide to expectations about currency movements as they allow foreign investors and companies to hedge the exchange rate at a particular level in the future.

Ruble spot trading on the Micex index will be closed May 11 for Russia’s Victory Day holiday.

To contact the reporter on this story: Emma O’Brien in Moscow at eobrien6@bloomberg.net

Last Updated: May 8, 2009 05:36 EDT