Russian Ruble Gains With Oil as Data Show Global Glut Abating

  • Currency rebounds from biggest drop in three months on Wed.
  • U.S. jobs data may influence further ruble gains: Rabobank

Russia’s ruble strengthened the most in a week as data showed a worldwide glut in crude may be abating, spurring appetite for assets in the world’s biggest energy exporter.

The currency appreciated 1.5 percent to 65.522 against the dollar by 5:05 p.m. in Moscow after slumping 2.8 percent on Wednesday. Brent crude advanced 3.7 percent to $46.26 per barrel after data showed U.S. production fell the most in eight months, helping recoup losses in the first three days of this week.

The ruble has gone from being the worst-performing currency in emerging markets at the start of 2016 to the biggest gainer alongside Brazil’s real as oil, the country’s biggest export earner, rebounded. Further gains may be tempered if U.S. jobs data on Friday is strong enough to prompt the Federal Reserve to raise borrowing costs in June, Rabobank said, an outcome which two senior U.S. policy makers hinted at this week.

The currency and oil continue “to move in tandem,” said Piotr Matys, a strategist for emerging-market currencies at Rabobank in London, who forecasts the ruble will weaken to 68 against the dollar by the end of May.

The 60-day correlation between crude and the currency was at 0.8 on Thursday, compared with a record 0.85 in April. A value of 1 would mean the assets are moving in lockstep. Oil and natural gas account for about a third of Russia’s budget revenue and almost 60 percent of exports.

Rising Prices

A deceleration in Russian inflation since September came to an end last month as an unfavorable base effect kicked in. Annual price growth was 7.3 percent for a second month in April, the Federal Statistics Service said Thursday. The central bank has resisted pulling the trigger on its first interest-rate cut since July as inflation expectations remain elevated and fiscal uncertainty roils the outlook for monetary policy.

The Micex Index of shares dropped 1 percent, declining for a third day. The biggest Russian exchange-traded fund Market Vectors Russia ETF had $4.3 million outflows on May 4, according to data compiled by Bloomberg. Five-year government bonds rose, pushing the yield down two basis points to 9.12 percent.

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