Hedge funds betting on Russian ruble

© Vladimir Trefilov
The Russian currency has rebounded 23 percent after collapsing to all-time low against US dollar. This is making Western hedge funds think more about investing in ruble assets.

Stuart Sclater-Booth, who oversees more than $40 billion at Stone Harbor Investment Partners, told Bloomberg he expects the Russian currency to appreciate to 63 against the dollar.

“We think Russia will offer attractive return potential for the rest of the year. You have tremendous carry in the ruble, we think oil found a bottom earlier this year and the central bank, we think, is going to be successful in bringing inflation down,” he said.

This January, oil prices fell to $27 per barrel, dragging down the Russian currency to its historic low of 86 rubles against the dollar. With Brent crude rallying to $42 per barrel the ruble has strengthened to 67 against the dollar.

Lutz Roehmyer, who helps manage $12 billion at Landesbank Berlin Investment told Bloomberg he’s adding ruble assets to his portfolio every day, increasing it from one percent last year to four percent in 2016.

“We expect some additional advances in oil prices, and we expect the ruble to continue strengthening against the basket of the dollar and the euro,” said the investor, whose unit of Landesbank, the $728 million Weltzins-Invest, outperformed 93 percent of competitors last year.

Last week, in an updated Russia forecast, the World Bank predicted the weakening of the ruble in 2016, without giving a projected exchange rate. The bank expects moderate growth in 2017.

In a new economic outlook for 2016-2018, the Russian Economic Development Ministry projects the ruble exchange rate to average about 67 against the dollar with a steady return to 57 by 2018, backed by the oil price rising to $50 per barrel in the next two years.