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Russian rouble hits 3-wk high vs basket, oil helps

Published 03/10/2009, 10:19 AM
Updated 03/10/2009, 10:24 AM
BARC
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MOSCOW, March 10 (Reuters) - The Russian rouble surged to a three-week high versus a euro-dollar basket on Tuesday, propelled upwards by higher oil prices and supported by recent official assurances that the currency will not collapse.

Last week's news of February trade and current account surpluses also lent support to the rouble.

Oil prices -- a key barometer for Russia's resource-focused economy -- jumped this week amid heightened geopolitical tensions [O/R]. Russian stocks and the rouble played catch-up on Tuesday, when domestic markets re-opened after a public holiday.

The rouble firmed as far as 39.25 per basket , its strongest since Feb. 16 and up nearly 2 percent on the day.

"Speculators are closing any remaining rouble shorts," said a trader at a European bank in Moscow.

"We think there is still room for a fall (in the basket), towards the 39 mark. Maybe on those levels we will see demand (for foreign currency) on the part of the central bank."

In January, the central bank defined the rouble's trading corridor at 26-41 per basket, putting a line under months of controlled devaluation to adjust for the worst economic outlook in a decade. It also pledged to intervene to stop sharp exchange rate moves in either direction.

Market participants were initially doubtful whether the corridor would hold. But a stabilisation of the oil price coupled with liquidity-limiting measures from the central bank have kept the rouble within the boundaries.

Last week, Prime Minister Vladimir Putin reiterated the message that there would be no sharp drop in the rouble, while the central bank's First Deputy Chairman Alexei Ulyukayev forecast a stabilising economy [ID:nL4893036]

Ulyukayev told Reuters the trade surplus stood at $16 billion and the current account surplus at $9.4 billion in the first two months of the year.

"Data shows significant falls in imports. It is now a real trend and undoubtedly creates a positive backdrop for the rouble," said Natalya Orlova, chief economist at Alfa Bank.

The call for rouble liquidity remained high, with demand for both central bank collateral-free loans and one-day repo funds roughly double the amount on offer on Tuesday.

Banks -- which exited their rouble longs last summer and autumn as the financial crisis took hold -- have cautiously started recommending buying the currency again.

"Recent better-than-expected developments in Russia's current account lead us to recommend having a tactical rouble carry trade," Barclays Capital said in a note, recommending one-month non-deliverable forwards (NDFs) versus the basket.

Citi also recommends one-month rouble longs, noting that Russia's reserves have stopped shrinking.

Reserves have stabilised at $380-390 billion in the past month after falling by a third since August as Russia sold dollars to keep rouble depreciation gradual. (Reporting by Toni Vorobyova and Andrei Ostroukh, editing by Mike Peacock)

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