Russian Ruble Hooks Up With Oil Rally to Surge Most in the World

© Bloomberg. Residential and commercial properties stand on the banks of Moscow river, viewed from the OKO Tower at the Moscow International Business Center (MIBC), also known as Moscow City, in Moscow, Russia, on Thursday, Dec. 15, 2016. Photographer: Andrey Rudakov/Bloomberg

(Bloomberg) — The currency of the world’s biggest energy exporter is finally doing what it’s supposed to be doing: rallying with the price of oil.

The was the biggest gainer in the world on Thursday as it played catch-up with crude’s surge above $77 a barrel following a national holiday. Oil had lost so much force as a driver for the currency that the 60-day correlation between the two assets has dropped to almost zero.

Thursday’s rally doesn’t necessarily mean the historic bond between the ruble and oil is making a more permanent come-back though. Investors are still wary of piling back into the ruble after being caught out holding overweight positions when the U.S. extended sanctions last month, and a recent rally in the dollar is keeping all developing-nation currencies in check.

Russia’s government also has a policy of buying foreign currency for its sovereign wealth fund when oil is above $40, which shields the exchange rate from excessive strength.

Yerlan Syzdykov, co-head of EM fixed income at Amundi SA, said in a research note last week that while fundamentals “look solid” for the ruble, it will remain a shock absorber of political risk, putting fair value at 61-62 versus the dollar. Thursday’s 2.3 percent jump took the currency to 61.75.

“We are witnessing a modest respite for emerging currencies following the recent rout,” Piotr Matys, a strategist at Rabobank in London, said on Thursday. “The ruble and its EM peers should struggle to regain their bullish momentum.”

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