Ruble Advances as Morgan Stanley Sees Softer Landing for Economy

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The ruble strengthened for the second day as Morgan Stanley said Russia’s economy wouldn’t shrink as much as earlier anticipated and developments in China and Greece boosted investor appetite for risk.

The currency gained 1 percent to 56.598 per dollar by 6:14 p.m. in Moscow, trimming its decline this week to 1.1 percent, after data on Thursday showed Russia’s current-account surplus surged by a bigger-than-anticipated 58 percent in the second quarter. Government bonds climbed, pushing yields on five-year securities to the lowest since June 15.

While the economy of the world’s largest energy exporter is on course for its worst slowdown since 2009, Morgan Stanley said on Friday it cut its recession forecast for the year to 4.2 percent from 5 percent. An improvement in oil prices and the weaker ruble supporting exports are softening the blow on the economy, it said. Markets rallied globally amid optimism Greece will be able to clinch a bailout and as China stemmed an equity rout following a government ban on insiders selling shares.

“The key driver for the ruble strength is the resumption of hopes that China will find a way to deal with its stock-market woes and Greece will ultimately be able to clinch a last-minute deal to stay in the euro area,” Ivan Tchakarov, an economist at Citigroup Inc. in Moscow, said by e-mail. “The current-account data is certainly providing a welcome boost to the currency.”

Domestic Funding

Yields on five-year government notes fell ten basis points to 11.08 percent. The Micex Index of stocks rose 0.5 percent, climbing for a second day as retailer OAO Magnit increased 2.8 percent and OAO Sberbank, the nation’s biggest lender, climbed 2.5 percent. Oil, which along with natural gas accounts for about 50 percent of Russia’s revenue, retreated 0.9 percent to $58.06 a barrel.

Russian companies, shut off from foreign capital markets by sanctions imposed over the country’s involvement in the conflict in eastern Ukraine, face $75 billion in foreign-currency debt payments between July and December, according to central bank data.

“Russia’s current-account surplus has risen to a level implying that available domestic funding sources now exceed the demand for financing, even under the sanctions,” Goldman Sachs Group Inc. economist Clemens Grafe said in an e-mailed note.

The surplus rose to $19 billion in the three months through June 30.