Moscow: The ruble gained to its strongest level in two months against the dollar and is headed for its best month this year as oil prices near a two-year high and rising interest rates bolster the currency's appeal.
Russia's currency climbed as much as 0.7 per cent to 30.15 per dollar yesterday, the strongest intraday level since October 25, and bound for its highest close since October 14.
The ruble, which was little changed at 34.66 versus the central bank's target dollar-euro basket yesterday, has gained 3.1 per cent in December versus the mechanism used to limit swings in the currency that disadvantage exporters, its biggest monthly advance since September 2009, according to data compiled by Bloomberg.
Crude, which along with natural gas makes up about a quarter of Russia's economic output, rose as much as 0.4 per cent to $91.34 (Dh335) a barrel in New York yesterday, near its highest in two years, amid speculation declining US fuel stockpiles will bolster prices. Bank Rossii lifted the rate charged on ruble deposits kept with the central bank by 0.25 percentage point to 2.75 per cent December 24, amid concern "inflation risks" are increasing, according to a statement issued after last week's monetary policy review.
"Banks are now trying to reduce their foreign-currency positions and are switching to ruble," Anton Nikitin, an economist at Moscow-based investment bank Renaissance Capital, said by phone yesterday. "The ruble trend will be determined by the current-account surplus which is bolstered by higher oil."
The ruble snapped a six-day advance, traded 0.3 per cent down at 30.27 as of 12.04pm in Moscow. The basket rate, which has been in place since 2005, is calculated by multiplying the dollar-ruble rate by 0.55, the euro-ruble rate by 0.45, then adding them together.
Gain versus euro
The ruble is little changed against the dollar in 2010, and gained 7.8 per cent versus the euro, bound for its best year since at least 2004, Bloomberg data shows. Ruble trading is subdued because many traders and investors are on holiday for the western Christmas period, Nikitin said. Dollar-ruble trading volumes on Moscow's Micex exchange slid to $2.64 billion on Monday, down from this month's peak of $4.95 billion on December 9.
Higher interest rates lure investors to the ruble by bolstering its allure as a carry-trade currency. In carry trades, funds borrowed in countries such as the US and Japan — where rates are near zero — are invested in places like Russia or Brazil where the returns are higher.
Russia's refinancing rate is at a record-low 7.75 per cent, while Brazil's Selic target rate has been raised three times this year to 10.75 percent.
The Micex stock index snapped two days of declines, climbing 0.1 per cent to 1,665.19, with OAO Lukoil, Russia's largest independent oil producer, rising 0.6 per cent to 1,746 rubles.
