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. Last Updated: 07/27/2016

Ruble Surges to New ’09 High

ReutersThe ruble has been showing strength in recent weeks, both against the dollar and the euro-dollar basket.

The ruble reached a new high for the year against the dollar Thursday, with the Central Bank allowing further gradual appreciation of the currency by shifting its intervention bid.

The ruble rose to 29.59 against the dollar as the Central Bank let the ruble strengthen beyond the 36.00 level to 35.95 against the euro-dollar basket, giving in to firming pressure from foreign investors buying ruble assets.

The ruble has been strengthening rapidly in recent weeks, both against the dollar and the euro-dollar basket that the Central Bank uses to guide its foreign exchange policy.

The Central Bank has administered a series of bid shifts already this week, widening the intervention corridor for each with $700 million in purchases.

Crude oil prices — a key component of both the ruble and Russia’s overall economic performance — rose above $71 a barrel, lending additional support to the currency.

Rising hopes about global economic recovery have spurred a shopping spree among investors willing to invest in riskier assets that lure with higher returns, said Vladimir Osakovsky, head of research strategy at UniCredit Bank.

“The optimism is benefiting currencies that were punished at the beginning of the year, and the ruble is one of those currencies,” Osakovsky said.

The equity markets followed the ruble higher, climbing the most worldwide on speculation commodity producers will boost earnings as Deutsche Bank raised its forecast for coking coal and Alcoa of the U.S. posted an unexpected profit.

Raspadskaya, Russia’s second-biggest producer of coal, rallied more than 5 percent, after saying it raised prices 69 percent in the fourth quarter. Norilsk Nickel gained 4.3 percent. The 30-stock MICEX Index jumped 4.3 percent to close at 1278.

The MICEX has doubled this year as oil and metals prices surged on investors’ expectations that a global economic recovery will boost demand for commodities. Alcoa, America’s largest aluminum producer, reported a third-quarter profit, benefiting from higher metals prices and savings from cutting jobs and materials costs.

Oil stocks rose on the rally in crude. Rosneft gained 4.9 percent as crude rebounded above $70 a barrel. Surgutneftegaz rose 3 percent.

The ruble’s surge pushed Sberbank up by 6.3 percent. A stronger ruble discourages Russians from withdrawing deposits, major source of funding for Sberbank, and converting their holdings into foreign currency.

(Reuters, Bloomberg)