Russia’s ruble strengthened to a 28-month high against the dollar as investors bought assets of the world’s largest energy exporter on increasing oil prices and the prospect of faster economic growth.
The currency appreciated 0.5 percent to 27.9399 per dollar by the 5 p.m. close of trading in Moscow, the strongest since Dec. 18, 2008, according to prices compiled by Bloomberg. It also gained against the target basket used by the central bank to manage ruble swings, adding 0.3 percent to 33.7044, a 1 1/2-week high.
The ruble has erased last week’s 0.5 percent drop against the dollar, jumping 1.4 percent in the past two days as crude pares last week’s 2.8 percent slide. Oil prices, trading $1.90 off their 30-month high in New York, will help Russia’s economy grow 4.2 percent in 2011, from 4 percent last year, Prime Minister Vladimir Putin told Russia’s lower house of parliament yesterday.
“We’re seeing a good convergence of factors which make the ruble attractive again,” Peter Rosenstreich, chief currency analyst at Swissquote Bank SA, Switzerland’s largest online currency broker, said by e-mail from Geneva today. “Surging oil prices, optimistic growth expectations supported by Putin’s GDP announcement and a risk-on environment” are supporting appreciation, Rosenstreich said.
Crude gained as much as 0.9 percent to $112.48 a barrel today, the highest since April 11, as earnings results for companies including Apple Inc. beat analysts’ estimates and an Energy Department report showed an unanticipated drop in U.S. oil supplies.
Putin ordered the Finance Ministry and central bank to meet with the nation’s business lobby group to discuss the strengthening ruble, his spokesman Dmitry Peskov said by phone.
The prime minister is aware that volatility in the currency -- which hit a 28-month high against the dollar today -- causes “discomfort” in the economy, Peskov said, adding Putin is paying “close attention” to the the ruble’s movements.
The Russian Union of Industrialists and Entrepreneurs, known as the RSPP, will meet with policy makers at some point between May 5 and 8, RSPP head Alexander Shokhin told the RIA Novosti newswire in Moscow today.
Stall the Advance
The ruble was little changed at 40.7498 per euro today. Bank Rossii buys and sells foreign currency to keep the ruble within a so-called “floating corridor” currently set at 32.45 to 37.45 against the basket, which is made up of about 55 percent dollars and the rest euros. The regulator seeks to temper the ruble’s fluctuations to protect Russian exporters.
Policy makers are buying as much as $200 million of foreign currency a day to stall the ruble’s advance at these levels, said Sergey Romanchuk, head of currency and money markets at OAO AKB Metalinvest Bank in Moscow. Russia’s foreign-currency reserves climbed to a 30-month high of $512.8 billion last week, according to Bank Rossii data published today.
The one-year basis swap, in which two parties exchange floating interest rates for the dollar and the ruble, narrowed to a one-month low of minus 56 basis points today. A narrowing of the rate signals investors are more comfortable holding rubles. The five-year cross-currency swap rate also dropped 6 basis points to 5.95 percent, the lowest this week, as the strengthening ruble diminished the appeal of swapping liabilities into dollars.
The dollar slid against all but four of the 25 emerging-market currencies tracked by Bloomberg today, and hit a 16-month low versus the euro, as investors turned to countries that offer higher yields as well as bigger risks, according to Denis Korshilov, head of foreign-exchange trading in Moscow at Citigroup Inc.
“Overall weak U.S. sentiment is on the cards again,” Korshilov said by e-mail.
The price on Russia’s debut ruble-denominated Eurobond rose for a third day, pushing the yield down 29 basis points, or 0.29 percentage point, to 6.72 percent, the lowest since the bond started trading March 1.
The government’s dollar debt due 2020 also advanced, leaving the yield six basis points lower at 4.85 percent, a 1 1/2-week low.