Azernews.Az

By Bloomberg

Russian stocks and the ruble advanced along with oil, while bonds rose before the government announces the terms of this week’s debt auction.

Ruble assets have been buoyed by stabilizing oil prices and a fragile two month-old cease-fire in Ukraine, which has reduced global tension along with speculation over further U.S. and European sanctions weakening the Russian economy. The world’s biggest energy exporter has the best-performing currency, with the ruble gaining 18 percent per dollar this year and recouping part of its 46 percent weakening in 2014.

The ruble strengthened 0.6 percent to 51.7050 at 1:45 p.m. in Moscow. The dollar-denominated RTS stock index gained 0.5 percent and is poised to close at its highest level since November. The relative strength index for both has held above 70 this week, a level that suggests to some analysts an asset may be poised to decline.

“The ruble’s strengthening has been very rapid.” Anvar Gilyazitdinov, who manages $10 million at Rye, Man & Gor in Moscow, said by phone. “The currency and stocks in dollar terms have been overbought.”

Russia’s five-year bonds advanced, trimming the yield seven basis points to 11.22 percent, the lowest since Dec. 2.

The Bank of Russia has increased the rate it charges to borrow dollars in repurchase auctions twice in as many weeks to discourage bets on higher-yielding ruble assets and trim the ruble’s advance. The so-called carry trade wagers have earned investors 23 percent this year, the most among global currencies tracked by Bloomberg.

Ruble Pain

“The central bank didn’t like that and in response they hiked FX repo rates, curbing the ruble’s strength,” Gilyazitdinov said.

The currency’s gains hurt government revenue as the Finance Ministry looks for ways to minimize what’s forecast to be its biggest budget deficit since 2010. Brent crude, which is used to calculate Russia’s main export blend, fell to a four-year low on April 9 when converted into ruble terms. Oil was 0.3 percent higher at $58.11 per barrel in London.

The stronger ruble also hurts energy exporters with costs in rubles and earnings in dollars. The shares of OAO Tatneft, OAO Gazprom Neft and OAO Lukoil declined after UBS AG analysts cut the shares to neutral, citing lower profitability and a stronger ruble, according to an e-mailed note.

Germany warned that the peace process in Ukraine risks breaking down as fighting continued to undermine the truce in the country’s easternmost regions. Rebels violated the cease- fire 26 times overnight, using mortars, tanks, anti-aircraft guns and small arms, military spokesman Serhiy Danylenko said in Kiev. The number of rebels wounded in the clashes has tripled to an average of 15 a day in the last week, the separatist-run news service DAN reported.

The uncertain situation in Ukraine means investor sentiment toward the ruble “may change overnight,” Piotr Matys, a London-based foreign-exchange strategist at Rabobank International, said by e-mail. “Betting on the ruble is still a fairly risky strategy.”