The Russian rouble notched up a seventh straight week of gains, hitting fresh 2-1/2 month highs versus a euro-dollar basket on Friday, cheered by fresh peaks in oil prices and domestic stock markets. Dealers said Russias central bank continued to buy dollars in a bid to avoid excessive rouble appreciation.
To this end, it bought $2 billion in the first week of April after purchasing $5 billion in February-March, the central banks first deputy chairman Alexei Ulyuakayev said this week. The roubles resurgence comes after months of devaluation to adjust to lower global oil prices and the worst domestic outlook in a decade. Russia spent a third of reserves, or $200 billion, to keep the depreciation gradual to avoid panic among Russians who clearly remember the rouble collapse during the 1998 crisis.
The rouble strengthened as far as 38.29 versus the basket according to Reuters data before closing at 38.31. It is now some 7 percent stronger than the 41 rouble rate set by the central bank as the boundary of its trading corridor. Dealers said the central bank intervened at 38.40 on Friday, before gradually moving its bid to 38.30.
They say in recent weeks it has moved its bid 5 kopecks after buying $500 million. "They bought a yard ($1 billion) today, probably two or three yards this week," said a dealer at a foreign bank in Moscow. Others backed his estimate.
"They are limiting it (rouble appreciation) but not by very much," said Unicredit trader Alexei Zaitsev. Russias Urals oil export blend rose to a five-month high above $52 a barrel on Friday, some $11 above the level factored into this years budget. Russias RTS and Micex stocks indexes also hit peaks not seen since the autumn.
Data from EPFR Global showed that funds have been putting money into Russia for the last four weeks, VTB Capital said. Analysts at Goldman Sachs now see the rouble holding stable at around 38.5 against the basket over the coming 12 months.
That is "about 6 percent stronger than our previous forecasts, to reflect the central banks willingness to accept greater rouble appreciation than we had anticipated," they said. "Though we remain constructive on oil prices, however, we believe the central bank is eager to ease monetary policy, and we expect the fiscal expansion to lead to renewed demand for imports, so the net impact is likely to be flat." The central bank has said it could start cutting rates - in a bid to stimulate the contracting economy - in coming month.