Azernews.Az

By Bloomberg

The ruble headed for its strongest level this year as advancing oil prices and a cease-fire in Ukraine propelled the currency of the world’s biggest energy exporter to the best performance in emerging markets.

Russian assets are rebounding as crude trades above $60 a barrel for a fourth week and the highest deposit rates among 18 emerging-markets lure investors even as the central bank unwinds its emergency interest-rate increase. Ukraine withdrew more weaponry from the frontline in its easternmost regions as the peace accord signed Feb. 12 takes hold.

“Oil is stable, the geopolitical situation is calming down, while the ruble boasts a very good carry,” Denis Korshilov, head of fixed income, currencies and commodities at Citigroup’s local unit, said in e-mailed comments. “What else do you need for a correction in one of the most oversold emerging-market currencies?”

The ruble strengthened below 60 versus the dollar for the first time since Feb. 26 on Friday and was trading up 2 percent at 59.62 against the greenback as of 12:52 p.m. in Moscow. Brent crude, the benchmark used to price Russia’s main export blend, rose 0.5 percent to $60.80 a barrel in London.

The ruble’s gains give central bank Governor Elvira Nabiullina greater scope to cut interest rates at the regulator’s next meeting on March 13, Korshilov said. The Bank of Russia cut its benchmark by 200 basis points to 15 percent in January after raising it six times last year, including a 6.5 percentage-point increase in December to defend the ruble and counter market turmoil.

Derivative Wagers

“The more the ruble strengthens by March 13, the higher the chances for a rate cut,” Korshilov said. “Perhaps even by 200 basis points.”

Forward-rate agreements compiled by Bloomberg show expectations for a 160 basis-point reduction in benchmark borrowing costs in the next three to six months, up from 47 basis points at the start of the week. Five-year government notes rose for a fourth day, reducing the yield 10 basis points to 13.61 percent, the lowest in almost two weeks.

The central bank is sticking to its forecast that inflation will slow to 12 percent by the end of the year, Interfax cited the first deputy governor Dmitry Tulin as saying on Thursday. While February’s inflation rate jumped to a 13-year high, the pace of weekly price growth slowed to 0.2 percent in the week through March 2 from 0.6 percent.

Climbing oil and a lull in the fighting in Ukraine have also contributed to a 2.8 percent weekly advance for the RTS stock index. The gauge climbed 1 percent to 921.64 on Friday.

A cease-fire between government forces and pro-Russian rebels in eastern Ukraine is “not perfect, with some violations still,” though “the trend is positive,” the EU’s foreign policy chief Federica Mogherini told a meeting of European lawmakers in Riga, Latvia, on Friday.