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Ruble Heads for Third Monthly Gain to Dollar; BofA Says Buy OFZs

Jan. 31 (Bloomberg) -- The ruble headed for a third monthly gain as oil traded close to the highest level in more than four months. Bank of America Merrill Lynch analysts recommended buying Russian government ruble debt.

The currency was little changed against Bank Rossii’s target dollar-euro basket at 34.83, by 11.40 a.m. in Moscow. The ruble was steady at 30.0385 against the dollar, poised for a 1.2 percent advance this month and a 4.3 percent appreciation in the last three. The yield on government ruble debt due 2018 rose three basis points to 6.20 percent, paring its drop in the month to 33 basis points.

“The paradigm of the Russian currency market remains the same: export sales are counterbalanced by non-aggressive, but persistent demand on foreign currency at 30 rubles per dollar,” ING Groep NV analyst Dmitry Polevoy wrote in an e-mailed note.

February will be a “tense” month on the local foreign exchange market with debt ceiling negotiations in the U.S. determining demand for riskier assets, including the ruble, according to Ruslan Tongiev, head of financial markets operations at Promsvyazbank OJSC.

“The anticipation of Euroclear and export revenue sales speak in favor of a strengthening ruble,” he said from Moscow by phone, referring to foreign investor access to the local bond market through Euroclear Bank SA. He forecasts the ruble will trade within a band of 29.70-30.70 rubles per dollar next month.

“Investors are growing increasingly optimistic as the global recovery continues to gain traction and perceived tail risks decline,” Bank of America emerging markets analysts wrote in an e-mailed note.

The analysts recommended ruble debt maturing March 2018 “as monetary policy eases and inflation structurally shifts lower.”

To contact the reporter on this story: Vladimir Kuznetsov in Moscow at vkuznetsov2@bloomberg.net

To contact the editor responsible for this story: Wojciech Moskwa at wmoskwa@bloomberg.net

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