Azernews.Az

By Bloomberg

The ruble climbed to the strongest level in three weeks, breaching a technical level that may signal more gains to come for the Russian currency as oil advanced to the highest since December.

The ruble traded up 1.2 percent at 49.9030 per dollar as of 11:48 a.m. in Moscow after piercing the 200-day moving average for the first time since July. Five-year government bonds rose, reducing the yield 11 basis points to 10.65 percent, the lowest since Nov. 26. The government is due to auction 25 billion rubles ($500 million) of bonds today including floating-coupon notes maturing in 10 years.

“The fact that the ruble is trading below this level should indicate that the currency is on a firm strengthening trend,” Yury Tulinov, the head of research at PAO Rosbank in Moscow, said in e-mailed comments.

Rebounding prices for oil, Russia’s main export, and a cease-fire that’s held in Ukraine since February have made the ruble the best performer among currencies globally this year. Optimism sanctions over Ukraine won’t be tightened coupled with high central bank interest rates are luring investors to Russian bonds, helping the government meet its funding targets as the economy heads for a recession.

Brent crude surged for a second day, adding 1.9 percent to $68.82 per barrel amid speculation U.S. output will slow. Russia’s oil and natural-gas industries contribute about 50 percent of the government’s revenue.

After selling all the debt offered at its four previous weekly auctions, the Finance Ministry will offer 15 billion rubles of May 2019 bonds and 10 billion rubles of floating- coupon debt due January 2025 on Wednesday.

Budget Impact

While government officials suggested in April that the ruble’s appreciation is too swift, when oil is also rallying “it makes no sense for the central bank to stand in the way,” Tulinov said. “Especially as it allows the Finance Ministry to borrow well.”

If the local currency’s gains outpace Russia’s dollar- and euro-denominated exports, it can hurt the budget by reducing the amount of rubles the government collects. The budget this year assumes a deficit equivalent to 3.7 percent of gross domestic production, Rosbank’s Tulinov said.

The Micex stock index fell 1.2 percent to 1,701.81 after rising to a two-month high on Tuesday.