Ruble Rebounds on Dovish Fed Bets as Russian Stocks Halt Slump

  • Micex Index of stocks rises for first time in four days
  • Russia sells all 15 billion rubles of fixed-coupon bonds

The ruble rose for the first time in four days and stocks rebounded as oil pared declines and investors speculated the Federal Reserve will keep its accommodative stance, boosting demand for riskier assets.

Russia’s currency strengthened 1.2 percent to 65.36 per dollar by 6:58 p.m. in Moscow after weakening 3.8 percent in three previous sessions. Brent crude slipped 0.2 percent to $49.74 a barrel in London, after falling 2.3 percent.

The ruble rebounded with emerging markets before the Fed’s decision. Futures traders have scaled back bets for the next interest-rate increase after worse-than-estimated U.S. payrolls data earlier this month and concern Britain will vote to leave the European Union roiled markets worldwide, wiping about $2.5 trillion off the value of global equities in the past week.

“Just a few weeks ago, today was seen as the potential D-Day for a hike,”  Tom Levinson and Iskander Lutsko, strategists at Sberbank CIB, wrote in a note to clients. “However, weak U.S. jobs data and Brexit concerns have ended this possibility.”

While the U.K.’s June 23 vote on EU membership remains an “uncertainty,” the ruble’s fair level with the current oil price is around 64 per dollar, so it has some upside, according to Denis Davydov, an analyst at Nordea Bank in Moscow.

Debt Auction

The Micex Index of major stocks rose 0.2 percent to 1,889.75, after falling 3.4 percent in three days to the lowest since May 24. On Tuesday, VanEck Vectors Russia ETF had $8.48 million outflows, according to data compiled by Bloomberg.

Five-year government bonds were little changed with the yield at 9.09 percent. The Finance Ministry sold all 15 billion rubles ($229 million) of fixed-coupon August 2021 ruble bonds at 9.15 percent and 6.15 billion rubles of January 2020 floaters of 10 billion ruble at a weighted average price of 103.2344 percent.

“Bonds with a fixed coupon are more attractive right now than floaters since the central bank has resumed monetary easing,” said Dmitry Dudkin, the head of research at UralSib Capital.

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