Azernews.Az

By Bloomberg

The ruble rose for a seventh day, extending its streak of gains to the longest since September 2013, as oil’s stabilization and a cease-fire in Ukraine spurred bets last year’s currency collapse was overdone.

The Russian currency jumped 2.1 percent to 52.5150 by 11:35 a.m. in Moscow, set for an 11 percent advance this month, the best worldwide. Government five-year bonds rose for a second day, lowering the yield six basis points to 11.92 percent, the lowest since Dec. 4.

Russian assets are reversing last year’s rout as the Ukraine truce holds and oil, the nation’s main export earner, trades above a six-year low. Local bonds are delivering the best local-debt returns in emerging markets as traders bet the central bank will keep unwinding a series of emergency interest- rate increases that took the benchmark lending rate to 17 percent in December.

“Households and corporates bought foreign currency last year -- now they’re scared,” Nikolay Zolotarev, the head of the investment department at OAO MDM Bank in Moscow, said by e-mail. “Nobody’s putting the brakes on this move. I have a feeling that until everyone sells out, it won’t stop.”

The central bank has cut the key rate twice this year to 14 percent, helping the country’s local debt return 27 percent in 2015, the most in emerging markets. Forward-rate agreements show traders are betting on 1.75 percentage points of rate reductions in the next three months, 20 basis points more than at the start of April.

Best Carry

“The market is always trading expectations, and right now everyone’s expecting rate cuts,” Zolotarev said. “Local players expect that the carry like that and the stabilizing situation will attract foreigners. Where else can they find yields like that?”

Borrowing in dollars to fund purchases of ruble debt, a so- called carry trade, has earned 21 percent since Jan. 1, exceeding the second-best currency, the Indian rupee, by more than six times.

The ruble rally propelled the currency’s relative strength index to 79 on Thursday, the highest since September 2013 and above the 70 level that indicates to some analysts that an asset is overbought. Crude oil, Russia’s main export earner, has climbed 2.1 percent to $56.69 per barrel in London after sliding 6 percent the day before. The price of Brent oil in rubles declined to 2,953 rubles, the lowest level since February 2011.

“By our estimates, we are already in overshoot territory for the ruble, but this trend can still continue for some time,” Vladimir Osakovskiy, chief economist for Russia at Bank of America Corp. in Moscow, said in e-mailed comments.

The dollar-denominated RTS stock index rose 0.3 percent to 991.21, the highest level since November. The ruble-denominated Micex index fell 1.8 percent, a third day of declines.