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. Last Updated: 07/27/2016

Ruble Hits Fresh 2009 Highs

MOSCOW — The Russian ruble hit fresh 2009 highs versus the dollar on Monday, with dealers saying the Central Bank had shifted its intervention level again to allow a little more appreciation.

The ruble has notched up six consecutive weeks of gains, powered by solid oil prices, broad-based dollar weakness and growing confidence that the worst is over for the recession-struck Russian economy and banking sector.

The Central Bank has been buying dollars, moving the boundary of a floating ruble corridor by 5 kopecks for each $700 million of intervention to keep the rally gradual.

The ruble firmed as far 35.8130 against a euro-dollar basket, according to Reuters data, before closing at 35.8461, up 0.2 percent on the day.

The intervention levels against the basket have been gradually shifting from the 36.40 mark at which the Central Bank began the current wave of foreign currency purchases in September to 35.90 on Friday and 35.85 on Monday.

Dealers said the Central Bank briefly stopped foreign currency purchases near the 35.85 mark that it was defending in the morning but then resumed interventions at that level.

"The level now is 35.85 … it seems the Central Bank technically stepped back, but then we saw them [again] at that level," said a dealer at a major foreign bank in Moscow.

Volumes were smaller than usual as global trading activity was subdued by a public holiday in the United States. Dealers estimated that the Central Bank bought about $700 million, suggesting that the next move of the boundary is around the corner.

"They just need to pour in a bit more, and then they will probably let it (the boundary) move," said Roman Pakhomenko, a dealer at Lanta Bank.

The ruble hit its strongest level since June against the euro, at 43.49. It set fresh 2009 highs versus the dollar at 29.50.

"If the global backdrop remains positive, then there is one trend [in the market] — to sell the dollar versus the ruble," said a dealer at another foreign bank in Moscow.

With risk appetite returning to global investors, the ruble is also benefiting from carry trades.

Although the Russian Central Bank has cut its benchmark refinancing rate by 300 basis points since April, at 10 percent it still offers very attractive returns compared to rates of 1 percent or less in the other Group of 8 countries.

Gains in Russia's bourses, which are at their highest levels since September 2008, have also helped the currency.

In the longer term, analysts and markets expect Russian rate cuts to continue and the ruble rally to run out of steam.

A Reuters poll last week showed the ruble at 30.90 per dollar in a year's time, while 12-month dollar/ruble nondeliverable forwards (NDFs), a barometer of market expectations, are trading at 31.85.

"With the Central Bank of Russia continuing to intervene on the FX market, domestic interest rates are set to extend sharp decline, which eventually should act as a trigger for the reversal of ongoing ruble rally," UniCredit said in a note.