Ruble Advances as Rosbank Sees Less Risk From Declining Crude

  • Micex heads for one-month high, Alrosa gains after share sale
  • Thirty-day correlation with Brent falls from February high

The ruble advanced for a second day, resisting weakening oil prices that Rosbank PJSC said are becoming a less-dominant force weighing on the currency.

Russia’s currency strengthened 0.2 percent against the dollar to 63.80 by 4:25 p.m. in Moscow as Brent oil traded 1.4 percent down to $47.79 per barrel. The Micex Index of major stocks rose 0.1 percent to 1,940, extending a gain of 3 percent over the last four trading sessions.

The link between the currency of the world’s largest energy exporter and oil has weakened as domestic and global factors other than commodity prices drive trading. Russia is an unexpected beneficiary of the U.K.’s decision to exit the European Union because sanctions cushioned it from the fallout, according to Rosbank.

"The ruble is driven by the softness of the global monetary policies as well as some sort of a safe haven status, insulating against problems in Europe," Yury Tulinov, head of research at Rosbank in Moscow, said by e-mail. "The ruble often ignores moves in oil."

Diamond Privatization

The 30-day correlation between Brent crude, used to price the country’s main export blend, and the ruble fell on Wednesday to 0.66, down from a 2016 high of 0.87 in February. A reading of 1 would mean the two are moving in lockstep.

The Micex Index moved within 1.7 percent of a record high, trading with a dividend yield of 4.6 percent, compared with 2.7 percent for MSCI Emerging Markets. Alrosa PJSC rose 3.3 percent to 71.45 rubles per share after the state finished the privatization of the 10.9 stake in the diamond producer and Interfax reported MSCI may increase Alrosa’s share in the MSCI Russia Index. 

Share prices are following in the steps of other emerging markets, according to Vyacheslav Smolyaninov, a strategist at BCS Financial Group in Moscow. The MSCI Emerging Markets index rose for the fifth-straight session to head for the highest level since November.

"Russia enjoys global tailwinds – it is not alone making new multi-month highs or being close to them," Smolyaninov said. "There’s an ongoing interest for emerging from global investors looking for yield."

The Finance Ministry sold all 15 billion rubles of September 2031 bonds it offered at an auction, attracting total demand of 25.3 billion rubles. The ministry sold 8.03 billion rubles of January 2020 floating-rate bonds out of 10 billion rubles offered at the second auction, the second week in a row it didn’t sell all of its floating-rate notes.

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