World's Best Currency Tear Leaves Russia Inc. Seeking a Breather

(Bloomberg) -- The end of the world’s biggest currency rally may be near but some Russian companies say another year of OPEC intrigue and elections won’t put the ruble’s new era of stability at risk.

The country’s largest miners of diamonds and gold -- Alrosa PJSC and Polyus PJSC -- alongside billionaire Ziyavudin Magomedov’s investment company Summa Group, believe the Russian currency may weaken by only about 5 percent next year from current levels, averaging 60 rubles against the dollar. Since touching a record low in January 2016, the ruble has appreciated 45 percent, adding to its best-ever year in 2016 with an increase of more than 7 percent in 2017.

World's Best Currency Tear Leaves Russia Inc. Seeking a Breather

“A fair exchange rate is closer to 60-61,” Alrosa Chief Executive Officer Sergey Ivanov said last week in an interview in the Pacific port city of Vladivostok, adding that his company is using a level of 61-62 for next year’s forecasts. “We win from further devaluation.”

The ruble has found its groove, benefiting from elevated interest rates in Russia and stable oil prices after output cuts implemented by the Organization of Petroleum Exporting Countries and its partners. While the central bank presses ahead with monetary easing, presidential elections approach in 2018 and the deal with OPEC is set to expire next April, Russia’s top executives say the calm will last.

“On the whole, the current situation with the ruble is rather balanced,” said Polyus chief Pavel Grachev, whose company sees the currency in the range of 57 to 60. “We don’t expect any strong fluctuations from this level until the end of 2017 and a part of 2018.”

Price swings in the ruble have abated, with its one-month volatility near the lowest in almost three years and the currency trading between 58 and 61 versus the dollar since mid-June. The correlation with oil is close to the lowest since February.

World's Best Currency Tear Leaves Russia Inc. Seeking a Breather

“Considering that we live in a pre-election year,” the currency will be at just below 60 toward the end of 2017, depending on oil, and stay at just over 60 in 2018, said Magomedov, chairman of Summa Group.

That’s still far more upbeat than the Economy Ministry, which forecasts the currency at 66.1 by the end of 2018 even after improving its outlook. The ruble was 0.3 percent stronger at 57.1875 against the dollar on Monday in Moscow.

“By and large, macroeconomic stability has been achieved,” said Vladimir Rashevsky, CEO of top coal producer SUEK, whose view is that the ruble may trade next year in a wider range both above and below its current levels. “If it were weaker than today, that would be more positive for our economy.”