Ruble Gains as Rescue Package, Oil Rebound Boosts Local Stocks

By Emma O'Brien

Sept. 24 (Bloomberg) -- The ruble strengthened for a second day against the central bank's dollar-euro basket as a rebound in oil prices and a government emergency-funding plan bolstered Russian equities.

The managed currency rose against the dollar and the euro as crude pared back yesterday's 12 percent slump, helping Russia's benchmark Micex Index to rise by the most for three days. A stock-market collapse last week forced markets to close for two days, prompting the government to pledge more than $100 billion in emergency funds to stabilize equities and reduce soaring borrowing costs.

The ruble's advance is supported by rising ``equity markets and improved risk appetite,'' said Jon Harrison, an emerging- markets currency strategist in London at Dresdner Kleinwort. ``The success of the Russian measures to stem outflows has helped.''

Russia's currency gained 0.3 percent to 30.2775 against the basket by 3:21 p.m. in Moscow, bound for its strongest close since Sept. 8. Bank Rossii, the central bank, keeps the ruble confined within a trading band against the basket to limit the impact of its fluctuations on the competitiveness of Russian exports.

The ruble was at 25.0120 per dollar today, from 25.0998 yesterday, when it fell 0.3 percent. It rose to 36.7084 per euro, from 36.7733. The basket rate is calculated by multiplying the ruble's rate to the dollar by 0.55, the euro rate by 0.45, then adding the two numbers together.

Oil `Driver'

The Micex Index climbed 4.5 percent to 1,118 today, as oil, Russia's largest export earner, rose 2.3 percent to $109.17 a barrel in New York trading.

``Oil is clearly the major underlying driver of Russian markets and that helps the ruble,'' said Beat Siegenthaler, chief emerging-markets strategist in London at TD Securities Ltd. ``The ruble is stronger from the weak end of the basket'' at 30.40, he added.

The 30-member Micex has lost 25 percent since the beginning of August as Russia's war with Georgia and the turmoil in global credit markets spurred investors to withdraw about $52 billion from the country, according to BNP Paribas SA estimates.

The emergency package, which includes $44 billion to bolster liquidity and $20 billion for buying ``undervalued'' shares in state-run companies, is boosting investor confidence, Paul Biszko, a senior emerging-markets strategist in Toronto at RBC Capital Markets, wrote in a note to clients today.

``A sense of relative calm has swept through Russian markets this week,'' he said. The ruble has strengthened more than 1 percent against the dollar since Sept. 19.

Russian government bonds were mixed, with the yield on the benchmark 30-year note declining 4 basis points to 6.93 percent, its first drop in three days. The two-year note yielded 6.18 percent, up 1 basis point. The difference in yield between Russian and U.S. two-year debt narrowed to 410 basis points, after widening to 469 points on Sept. 16.

To contact the reporter on this story: Emma O'Brien in Moscow at eobrien6@bloomberg.net