Ruble Gains as Citi Says Prospect of Oil Bottom Stoking Appetite

  • Russia sold all local debt offered in OFZ auctions today
  • Any optimism from Yellen could be `short-lived': Commerzbank

The ruble ended four days of declines and the government sold all the bonds it offered at auctions as oil rallied and Citigroup Inc. said traders are increasing exposure to the Russian currency amid speculation crude is close to a bottom.

The ruble strengthened 2.3 percent to 77.9510 by 6:34 p.m. in Moscow, leading its emerging-market peers and trimming a 3.5 percent, four-day retreat. Government bonds advanced for the first time in four days as the Finance Ministry sold all 25 billion rubles ($316 million) of fixed- and floating-coupon notes offered in auctions.

Swings in the oil price have made the currency of the world’s biggest energy exporter the most volatile after Argentina’s peso. The currency climbed earlier with other emerging markets as Federal Reserve Chair Janet Yellen said continued market turmoil could throw the central bank off course from the multiple rate increases policy makers have forecast for 2016.

“There are investors out there with long ruble positions that are now providing a good support for the currency,” Ivan Tchakarov, chief economist for Russia at Citigroup Inc. in Moscow, said by e-mail. “This is driven by rising bets that oil, while very volatile, is somewhere close to the bottom. The ruble, clearly, will be a key beneficiary if these bets prove correct."

Oil’s Decline

While the price of a barrel of Brent in rubles jumped 1.1 percent to 2,442 on Wednesday, it’s still below the average level of 3,165 rubles used to calculate the government’s 2016 budget. The 30-day correlation between crude and the ruble rose to 0.856, close to a record reached in October. A reading of one would mean the two assets move in lockstep.

Any positive sentiment from Yellen signaling the pace of rate increases will be slower "can easily turn around within an hour," Simon Quijano-Evans, the chief emerging-markets strategist at Commerzbank AG in London, said by e-mail. “Traders need to regain confidence in a market that has been shaken by global economics woes and geopolitics.” 

Government bonds erased earlier losses and advanced for the first day in four, pushing the yield on five-year debt seven basis points lower to 10.41 percent. Russia’s Finance Ministry sold 10 billion rubles of so-called OFZ bonds due February 2027 as well as 15 billion rubles of floating-rate debt due in January 2025.

Russia’s benchmark stock gauge, the Micex Index, rose 0.7 percent. The Market Vectors Russia ETF had $10.66 million of outflows on Feb. 9, according to data compiled by Bloomberg.

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