Russia’s ruble headed for its biggest gain in a month as traders returned after a public holiday, catching up with a spike in oil above $40 per barrel and an uptick in appetite for riskier assets. The chance of a victory for Joe Biden in the U.S. elections and the possibility of new sanctions against Russia has pressured the ruble for months, but some investors argue that the geopolitical risks are mostly priced in. Crude oil, Russia’s key export earner, surged almost 4% on Wednesday when local markets were shut.
The “lack of increased tensions between Russia and the U.S. after the elections,” which investors had feared, has supported the ruble, Sberbank strategist Yuri Popov said by email. If this persists, the “geopolitical premium” of about 10 rubles in the exchange rate versus the dollar will gradually decrease, he said. As the vote approached, the ruble sank 7% in the last three months, one of the worst performers in emerging markets. Sanctions concerns returned to local markets with the poisoning of an opposition activist and Moscow’s support for the incumbent in Belarus’ disputed presidential vote.
But on Thursday, with Biden poised to claim victory, the ruble was the biggest gainer in emerging markets. The currency rose as much as 1.9% to 77.86 versus the dollar, while local 10-year bond yields tumbled 23 basis points to 6.01%, the lowest level in almost two weeks.