Ruble Climbs as Investors Await Output Freeze From Doha Meeting

  • Russians turn bullish on ruble, expect 49 vs USD in 1 year
  • Major oil exporters to discuss output freeze on April 17

Russian stocks advanced and the ruble romped toward a second weekly gain as Brent crude traded back above $40 a barrel, spurring appetite for assets in the world’s biggest energy exporter.

The currency climbed 1.5 percent to 67 per dollar by 6 p.m. in Moscow, the third-best performer among 24 emerging-markets tracked by Bloomberg, and heading for a 0.9 percent increase for the week. The Micex Index added 0.9 percent to 1,875, led higher by Sberbank PJSC and Gazprom PJSC.

Underpinning Russian assets was a buoyant energy market, with oil trading 6.2 percent higher before a meeting in Doha scheduled for April 17 between major exporting countries to discuss freezing output in a bid to stabilize prices. Russia relies on oil and gas sales for about half its revenue.

“The ruble is breathing down oil’s neck by following it this closely,” said Artem Roschin, a currencies dealer at Aljba Alliance bank in Moscow who expects the currency to strengthen to 66.5 against the dollar if oil continues its gains. “Next week is going to be an exciting one as we approach the Doha meeting."

Russian government bond markets also strengthened, with the yield on five-year debt dropping seven basis points to 9.34 percent, as investors weighed the boost from stronger energy markets to the government’s finances.

Bullish Forecasts

The currency’s 12 percent advance last month has prompted renewed optimism for its prospects among Russians, who expect the ruble to strengthen to 49 per dollar in 12 months, the most bullish forecast in more than a year, according to the state-run polling company VTsIOM. This prediction compares with a median estimate of 70.5 among analysts surveyed by Bloomberg.

“I don’t really understand what the population is so optimistic about since the economic fundamentals still aren’t good,” Roschin said.

Goldman Sachs Group Inc. revised its 2016 growth forecast for Russia to 0.5 percent from 1.5 percent, citing persistently weak oil prices, economists Clemens Grafe and Andrew Matheny said in a note to clients. The economy is hemmed in by oil still trading at less than half its five-year average price, exacerbating the impact of U.S. and European sanctions linked to the Ukraine conflict.

Investment funds pulled $7.6 million from Russian stocks in the week to April 6, Sberbank CIB said in an e-mailed note, citing EPFR Global data.

Sberbank, Russia’s biggest lender, jumped as much as 4.4 percent to 113.30 rubles, the highest level on record on a closing basis.

“Sberbank is the most sensitive to the ruble’s strengthening and the oil price gains,” said Vadim Bit-Avragim, a money manager at Kapital Asset Management LLC in Moscow.

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