Ruble Extends Best Emerging-Market Gain Since OPEC Algiers Deal

  • Brent in rubles advances to highest level since Aug.
  • Investors cut exposure to OFZs in September, Aton says

The ruble extended the best performance in emerging markets since OPEC’s deal to cut production as oil markets got an added lift on Wednesday from weak U.S. stockpile data.

Russia’s currency rose 0.5 percent to 62.350 against the dollar by 6:32 p.m. in Moscow. That brought the increase in the past six sessions to 2.4 percent, driven by the Organization of Petroleum Exporting Countries’ agreement on Sept. 28 to limit supply for the first time in eight years. Brent crude, the benchmark used to price Russian oil, has jumped 13 percent in the same period to trade at $51.90 a barrel.

Oil outpacing gains in the ruble translates to higher public revenues in local currency terms, boosting Russia’s fiscal outlook as it faces its widest budget deficit since 2010. If the currency rises faster than oil markets, public finances can come under pressure because energy-export revenue, priced in dollars, converts into fewer rubles. The price of oil in ruble terms on Wednesday rose 1.4 percent to its highest level in more than a month.

“The ruble’s move is defined by oil, and in the short term the currency could get even stronger at such oil levels,” said Sergey Narkevich, an analyst at Moscow-based Promsvyazbank. At the same time, he warned that the ruble might come under pressure in December, falling to 70 to the dollar if the Federal Reserve increases U.S. interest rates, diminishing the appeal of emerging markets.

Five-year bond yields added nine basis points to 8.42 percent. The Finance Ministry sold all 10 billion rubles ($160 million) of August 2021 fixed-coupon ruble notes at auction today.

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