Ruble Posts Record Gain on Oil Surge

MTMonday’s rally in oil prices sparked an overdue correction for the ruble.

The ruble jumped more than 2 percent against the dollar Monday, tallying up a record gain as oil rallied and equity markets surged.

The currency rose 2.4 percent against the dollar to 31.05, following through on last week’s 2.9 percent rally. Monday’s jump was the largest single-day jump since 1999, Bloomberg reported.

The ruble has gained 16 percent against the greenback since February, and is 5.5 percent off its July lows. The ruble gained 1.8 percent against the Central Bank’s basket of 55 cents and 45 euro cents to close at 36.99.

Prices for Urals crude, Russia’s main export blend, set the stage for the currency’s rise, as it advanced for a fourth day to more than $65 per barrel on a weak dollar and fresh hopes for a global economic recovery. The commodity is up nearly 15 percent on the year.

Energy stocks rose in sympathy with oil, setting off a rally in broader markets, with positive news from the U.S. economy doing its part to send exchanges higher, as leading economic indicators rising for the third straight month in June raised hopes that a global recovery could be around the corner.

The MICEX Index closed the day up 2.9 percent at 994.28 after briefly breaking the 1,000 mark, while the dollar-denominated RTS closed slightly over 5 percent higher, at 972.31.

The ruble’s growth is not likely due to any fundamental changes in the economy, however, and may be little more than a technical bounce.

The ruble has been oversold since July 1, when the Central Bank lifted restrictions on how much foreign currency Russian banks can hold as part of their overall assets, said Yulia Tseplyayeva, chief economist at Merrill Lynch.

“Once the restrictions were lifted, money went out of the ruble and into other currencies and eurobonds,” Tsyplyaeva said.

Monday’s rally in oil prices sparked an overdue upward correction in the currency’s price, she said.

“This was much more of a technical event than a fundamental one,” she said. “Although capital inflows have improved and investor sentiment is more positive, the economic picture is largely the same as it has been.”

Traders, however, chose to focus on the short-term outlook, bidding up blue chips to extend a weeklong rally in the equity markets.

Norilsk Nickel was the day’s biggest gainer, climbing 5.6 percent as copper hit a nine-month high on a weaker dollar and improving economic sentiment, with some analysts expecting growth in demand for industrial metals toward the end of the year.

Gazprom shares rose 4.1 percent for a sixth straight day of gains, while Sberbank gained 2.7 percent, as a rising ruble made deposit withdrawals or conversions less likely.