Russian Assets Surge as Oil Takes Off

Russian assets jumped on Thursday, supported by a lift-off in the oil price and rally on international markets, helping to erase the impact of a plunge in global shares earlier in the week.

 

At 1515 GMT, the rouble was 3.7 percent stronger against the dollar at 66.25 and up 4.3 percent to 74.41 versus the euro.

 

The dollar-denominated RTS index of Russian shares was up 6.5 percent to 804 points, while the rouble-based MICEX was 1.8 percent higher at 1,690 points.

 

Yields on Russian sovereign Eurobonds also dropped across the curve, indicating higher prices.

 

"Revived risk appetite and rising oil prices have given the rouble some breathing space," analysts at Sberbank CIB said.

 

International oil benchmark Brent jumped more than 6.5 percent to over $46 a barrel, helping Moscow-listed assets since oil is Russia's biggest export.

 

The last end-of-month tax payments fuelled gains in the rouble, as did comments by central bank head Elvira Nabiullina, who said late on Wednesday the bank would offer to roll over its one-year forex repos to help ease banks' forex needs.

 

Currency dealers said a short squeeze against those who had bet against the rouble was adding to momentum on the currency market.

 

Risk appetite worldwide was boosted by strong U.S. economic data and by comments from a U.S. Federal Reserve policymaker who said the case for an interest rate hike next month was "less compelling" than a few weeks ago.

 

Those comments helped to offset investors' fears about a Chinese economic slowdown, which had sent markets crashing at the start of the week.

 

"Investors have suddenly begun to suppose that fears about the slowdown of the Chinese economy are exaggerated," VTB24 analyst Oleg Dushin said in a note.

 

VTB Capital analysts said the rouble had been pricing in Brent at $40 per barrel, underperforming emerging market peers, as a result of which a recovery in the oil price would fuel profit-taking on long dollar/rouble positions.

 

Other analysts cautioned, however, that the rouble remained fragile, given hefty upcoming debt payments by Russian firms at a time of restricted access to Western markets due to sanctions.