Ruble Trims First Weekly Drop in Four on Oil, Yellen’s Remarks

Updated on
  • Ruble is second-best performer in emerging world this year
  • Rally has further to run with 60 level by December: Rabobank

The Russian currency strengthened, paring its first five-day decline this month, as oil advanced and the Federal Reserve Chair’s speech triggered bets that U.S. rate increases will be gradual.

The ruble erased earlier losses and climbed 0.5 percent to 64.3625 against the dollar by 5:51 p.m. in Moscow, poised for a 0.8 percent drop this week. Crude, the nation’s key export earner, jumped 1.9 percent to $50.61 a barrel. Russia relies on oil and natural gas sales for about a third of its budget revenue.

Investors bought the Russian currency after the Fed Chair Janet Yellen avoided discussing the specific timing of a rate move in her first public comments since June. The recovery in oil and appetite for emerging-markets as the U.S. central bank extended near-zero rates at all five meetings this year, helping drive demand for riskier assets and catapulting the ruble to the second-strongest among peers this year.

“The markets do not expect a hike until December the earliest,” said Piotr Matys, a currency strategist at Rabobank in London, who expects the Russian currency to strengthen to 60 per dollar by the end of the year. “As long as the Fed tightens gradually and ends the cycle with rates well below the pre-global financial crisis levels, the ruble should cope with that."

Five-year government bonds rose, pushing the yield three basis points lower to 8.65 percent, bringing the weekly decline to seven basis points. The Micex Index was little changed at 1,987.41.

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