Ruble Has Longest Rally to Dollar as Fed Refrains From Tapering

The ruble had a record streak of gains against the dollar after the U.S. Federal Reserve unexpectedly refrained from cutting stimulus, spurring investor appetite for high-yielding, emerging-market assets.

The ruble advanced for a 10th consecutive day, appreciating 0.4 percent against the dollar to 31.6865 by 6 p.m. in Moscow when the central bank stops its open market transactions. That’s the strongest level for the currency since May, when Fed Chairman Ben S. Bernanke stoked speculation the central bank’s bond-buying program would be pared, triggering a rout in developing-nation currencies. The yield on 10-year ruble bonds fell 24 basis points to 7.14 percent, the lowest since May 29.

The Federal Open Market Committee said it wants more evidence of an economic recovery before paring its $85 billion-a-month bond buying program. A group of 20 of the most-traded emerging-market currencies lost 7.4 percent between May and August, the most in two years. It rose 0.7 percent today.

“I haven’t seen such a long move for a while,” Artem Roschin, a foreign-exchange dealer at OOO KB Aljba Alliance bank in Moscow, said by phone. “Given how deep the ruble has dropped before that, it’s no surprise.”

The ruble earlier strengthened to 31.5075 against the dollar, breaching its 200-day moving average of 31.5534, a test for some traders of whether the run of strength has momentum to continue.

Support Level

“The ruble is overbought against the dollar, and there is an important support level in the face of the 200-day moving average,” Sergey Fishgoyt, a foreign exchange trader at OAO Otkritie Bank in Moscow, said by phone.

The ruble would need to end the week “substantially stronger” than the moving average for technical indicators to justify the rally continuing, Fishgoyt said.

The ruble lost 6.5 percent from May 22 to the start of the current rally against the dollar, data compiled by Bloomberg show. The Russian currency advanced 0.1 percent against the euro to 42.9375 today and gained 0.3 percent to 36.7448 against the central bank’s target basket of dollars and euros, the strongest since June 17.

Oil, Russia’s main export earner, fell 0.9 percent to $109.63 per barrel in London, paring yesterday’s 2.2 percent advance.

The Finance Ministry sold 30 billion rubles ($950 million) of OFZ bonds on Sept. 18, its largest placement of local debt in three months. The ministry sold 2028 notes at an average yield of 7.81 percent, one basis point off the top end of guidance and the first time since April that it sold all the 15-year debt offered.

‘New Money’

“The bonds have been rising for the last couple of weeks,” Evgeny Shilenkov, head of trading at Veles Capital in Moscow, said by phone. “The vector has changed, money started flowing back in. This all culminated in yesterday’s Fed statement.”

The ministry also placed 10-year bonds at an average yield of 7.47 percent yesterday, compared with guidance of 7.45 percent to 7.50 percent.

The volume of trading in 10-year notes on the Moscow Exchange was 9.4 billion rubles at face value, almost four times the three-month average, data compiled by Bloomberg show. “We saw purchases along the curve,” Shilenkov said. “Foreigners were buying, some short covering, but there was some new money as well.”

Emerging-market funds “have been running high cash positions and we see a good chance they will be forced to add risk as the market rallies,” Morgan Stanley analysts led by Rashique Rahman said in an e-mailed note.

Tax Period

Russian companies will pay about 1.12 trillion ruble of tax in the last two weeks of September with the largest payment of 370 billion rubles for mineral extraction levies due Sept. 25, according to VTB Capital.

“If exporters were holding back some of their revenue, they will take advantage of this opportunity to sell it all down,” KB Aljba’s Roschin said.

The ruble has almost priced in the capital flows the Fed’s continued easing may entail, Fishgoyt said. “We see another one percent gain for the ruble at best. After that, we go long on the basket against the ruble.”

Russian consumer spending slowed more than economists estimated in August and investments fell the most since 2010 as the world’s biggest energy exporter remains mired in its steepest economic slowdown since 2009, Federal Statistics Service data showed yesterday.

Russia’s real GDP growth may have slowed to 1.7 percent in August from 2.1 percent in July, Alexander Morozov, chief economist for Russia and the Commonwealth of Independent States at HSBC Holdings Plc, said in an e-mailed note yesterday.

“The economy is stagnating,” Otkritie’s Fishgoyt said. “The numbers are weak from the macro point of view, while the ruble is overbought in terms of technicals.”

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