Ruble Gains With Oil as Hedge Funds Increase Currency Bets

  • Net long ruble positions rise in week, CFTC data show
  • Bonds climb, with yield on five-year notes extending decline

The ruble rose as oil headed for the first monthly gain since October and hedge funds increased bets the Russian currency will strengthen.

The ruble advanced 0.8 percent to 75.62 per dollar by 5:45 p.m. in Moscow, paring its monthly decline to 0.4 percent. Brent crude gained 1.7 percent to $35.71 per barrel in London on Monday, heading for a 3 percent gain in February.

Russia’s currency “will be dominated by the price of oil and talks with OPEC at least until the middle of March,” said Denis Davydov, an analyst at Nordea Bank in Moscow. “It has a perfect chance to gain about 5 percent from here if oil confirms it has bottomed out and moves firmly above $35 per barrel.”

The ruble has remained closely tied to fluctuations in the price of oil, with the correlation to crude at 0.83 on Monday, close to a record high of 0.86 set in October, as Russia and Saudi Arabia negotiate a plan to cap output in an effort to stabilize global oil prices.
Hedge funds and other large speculators increased net long ruble positions to 1,434 futures in the week ended February 23 from 1,228 contracts in the prior five trading days, U.S. Commodity Futures Trading Commission data show.

If oil recovers to $40, the ruble may climb to 70 per the dollar, a level last seen in December, said Dmitriy Kosmodemiyanskiy, a money manager at Otkritie Asset Management in Moscow. The ruble has added 5.9 percent since reaching a record low on Feb. 11.

The yield on five-year notes fell one basis point to 9.80 percent, extending the decline in February to 51 basis points. The Micex Index of stocks gained 1 percent to to 1,835, set for an advance this month of 2.8 percent.

— With assistance by Vladimir Kuznetsov

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