The ruble strengthened for a third day as ING Groep NV said even the prospect of an interest-rate cut next week won’t abate gains.
The Russian currency advanced 0.8 percent to 64.56 against the dollar by 5:47 p.m. in Moscow. Brent oil has added 3 percent in the past three days. The Micex Index of major stocks rose 0.9 percent to 2,035, touching a record for a third day, led by Gazprom PJSC.
The allure of higher Russian yields relative to developed markets will survive a widely expected rate cut, according to strategists at ING who forecast the central bank will probably reduce its benchmark by 50 basis points to 10 percent when it meets on Sept. 16. Should the reduction transpire, Russian interest rates would remain some of the highest in emerging markets, lending staying power to dollar-funded carry trades buying rubles which have generated 21 percent this year, the most after Brazilian reais, it said.
"The carry is on the ruble’s side, given the wide differential in interest rates," said Dmitry Polevoy, ING’s chief economist for Russia.
Government bonds rose, pushing the yield yield on notes due February 2027 down two basis points to 8.13 percent, 237 basis points below the key rate, the biggest discount since July last year.
The "OFZ curve is pricing in further monetary easing in the most aggressive fashion among all Russian rates," VTB Capital analysts Maxim Korovin and Tatiana Chernyavskaya said in a note to clients.