- Stimulus bets shine spotlight on highest yields in EM: Matys
- Citigroup says ruble will stabilize as oil finds floor at $50
The Russian currency extended the biggest weekly advance in two months as emerging markets became unlikely beneficiaries of Britain’s decision to leave the European Union and the price of oil stabilizes at about $50 a barrel.
The ruble rose 0.1 percent to 63.92 against the dollar by 5:18 p.m. in Moscow, up 2.1 percent this week, the most since the five days through May 1. Five-year bonds traded at the strongest levels since July 2014.
Sanctions imposed over Russia’s role in the Ukraine crisis have diminished its ties to the U.K. and Europe, sheltering the country’s markets from Brexit-related fallout. Meanwhile, speculation that central banks will react with more stimulus has propelled a rally in its bonds as investors seek to offset what could be another two years of low Federal Reserve rates.
“Somewhat paradoxically, Russia is viewed these days as a relative winner from Brexit and its aftermath,” said Citigroup Inc.’s Moscow-based economist Ivan Tchakarov. “Russia’s much more limited trade and financial exposure to the U.K. makes it less vulnerable to the aftershocks of Brexit."
Tchakarov forecasts the ruble will stabilize around current levels as oil settles near $50 a barrel, the average for the past month. Brent crude was up 0.6 percent at $50.02 a barrel on Friday. The yield on five-year bonds fell 12 basis points to 8.54 percent.
“With its status of a high-yielding emerging-markets currency, the ruble will become a destination for investors seeking to offset rate repression,” said Piotr Matys, a strategist at Rabobank in London.