Ruble Trims Rally on Oil Decline as JPMorgan Joins Russia Bulls

  • Russian currency is best performer worldwide in past month
  • JPMorgan joins Goldman, Danske Bank upgrading ruble forecasts

The ruble trimmed the strongest rally among global peers as oil prices declined, while JPMorgan Chase & Co. joined other banks raising their forecasts for the Russian currency.

The ruble fell for the first time in three days, retreating 0.8 percent against the dollar to 68.0490 by 5:20 p.m. in Moscow and paring its advance in the past month to 10.7 percent. Climbing crude prices on Tuesday helped the currency of the world’s biggest energy exporter recover from losses triggered by the terror attacks in Belgium. Brent oil fell 2 percent in London trading to $40.95 a barrel.

JPMorgan followed Goldman Sachs Group Inc. and Danske Bank A/S in upgrading its outlook for the Russian currency on higher oil-price assumptions. The U.S. bank said crude averaging $38 per barrel in 2016 will help the ruble strengthen 4.8 percent by the end of the year to 64.6 versus the greenback.

"There’s a feeling that we’ve passed the bottom in oil prices," Alexey Tretyakov, a manager of fixed-income portfolios at Aricapital Asset Management in Moscow, said by e-mail. "While there are risks that the rally won’t last, with all things being equal there are chances the ruble can strengthen further to 60-65 against the dollar in the spring."

Options Bets

Aricapital has boosted ruble assets to 35 percent of its portfolio from 15 percent at the start of the year, he said.

JPMorgan recommends betting on the Russian currency either by selling Turkish lira and the South African Rand, or by options that allow investors to wager on a decline in implied volatility, analysts Anatoliy Shal and Anezka Christovova wrote in a note to clients. The ruble’s one-month implied volatility at 22.8 is the second-highest among 23 emerging-markets currencies tracked by Bloomberg.

Russia’s 50-stock Micex Index fell 1.5 percent to 1,875.12, extending its decline to three days. Five-year government notes fell, pushing the yield seven basis points higher to 9.21 percent.

The Finance Ministry sold the entire 12 billion rubles of February 2027 fixed-coupon notes it offered in the first of two auctions today. The second auction raised 9.4 billion rubles compared with a target of 18.6 billion from January 2020 securities indexed to the Ruonia overnight rate.

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