The ruble rose to a 2015 high on speculation the U.S. will keep interest rates lower for longer, extending a rally that Morgan Stanley warned poses a threat to Russia’s budget.
The currency appreciated 1.9 percent to 56.5310 per dollar by 6:34 p.m. in London, leading advances among all but three of 23 developing-country peers tracked by Bloomberg. That brought the jump this year to 7.4 percent, compared with a 5.4 percent decline for oil, Russia’s main export earner. Government bonds fell and the Moscow Exchange led stocks to a four-month high.
By moving out of step with crude, the ruble is reducing Russia’s export earnings in a year when analysts are projecting the widest fiscal deficit ratio since 2010. This underpins the downside risks to the rebound in Russian assets amid a cease-fire in eastern Ukraine and prospects for a slower increase in U.S. interest rates.
The ruble is being “driven by financial flows rather than fundamentals,” Alina Slyusarchuk, an economist at Morgan Stanley in London, said in an e-mailed note. “If continued, a stronger ruble would mean lower oil and gas budget revenues and less of a current-account improvement.”
Morgan Stanley forecasts Russia’s economy will contract 5.6 percent in 2015, weighed down by sanctions over the conflict in Ukraine and the 48 percent slide in Brent crude in the past 12 months. As five-year government bonds fell on Thursday, the yield climbed eight basis points to 12.21 percent.
The advance in the ruble today happened even as Brent sank sank 4.1 percent in London to $54.75 a barrel, reversing the 3.6 percent jump on Wednesday. U.S. hiring and manufacturing data came below forecasts this week.
“All other things being equal, this signals a delay in the Fed rate hikes, and is hence positive for risky assets,” Yury Tulinov, the head of research at OAO Rosbank, said in e-mailed comments.
The dollar-denominated RTS Index of equities jumped 2.6 percent to the highest level since Dec. 3, while the Micex Index gained 1 percent. Shares of the Moscow Exchange soared 7.4 percent as Russia’s central bank, the largest holder in the stock with an 11.7 percent stake, said it won’t sell the stock as initially planned by Jan. 1 of next year.
“The share overhang risk will now disappear,” Olga Naydenova, a banking analyst at BCS Financial Group in Moscow, said by e-mail. “It’s important that the central bank confirmed its partnership and interest in the exchange’s development.”
(An earlier version of this story corrected the day specified in the second, ninth paragraphs.)