The ruble strengthened on Friday, buoyed by a bounce in global oil prices, expectations that exporters will soon convert hard currency into rubles and foreign investors taking advantage of high Russian interest rates.
In the morning in Moscow, the ruble was around 0.9 percent stronger against the dollar at 63.57 and gained 1.3 percent to trade at 72.15 versus the euro.
“Sentiment towards the ruble has changed, first of all due to European QE (quantitative easing), since the ruble is interesting for carry trade. I think the dollar/ruble pair could fall back to around 60-61,” said a currency dealer at a large Western bank in Moscow.
The European Central Bank said on Thursday it would buy 60 billion euros of bonds a month starting in March, boosting Russian assets.
A carry trade is a strategy whereby an investor borrows money at a low interest rate to invest in an asset that is likely to provide a higher return. Russia's key interest rate is at 17 percent, more than 10 percent higher than in most Western countries.
The ruble was also supported on Friday by higher prices for oil, Russia's chief export. Brent crude was trading up over 1 percent at over $49 a barrel on Friday, as news of the death of Saudi Arabia's King Abdullah added to uncertainty on energy markets.
Russian exporters were also expected to be converting their foreign-currency earnings into rubles to meet tax payments due on Monday, including for the mineral extraction tax, one of Russia's biggest monthly taxes.
“We think export has increased hard currency selling ahead of tax payments,” Maxim Korovin, a forex analyst at VTB Capital bank said in a note. “The heaviest ones are scheduled for next week, so the offer in the FX spot market could persist.”
Russian shares also firmed on Friday, extending strong gains from the previous session after the ECB's QE program was announced.
The dollar-denominated RTS index was up 2 percent to 833 points, while its ruble-based peer MICEX traded 0.9 percent higher at 1,680 points.