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Russian rouble recoups losses, stocks rise with central bank meetings in focus

Russian rouble recoups losses, stocks rise with central bank meetings in focus

MOSCOW: The Russian rouble recouped losses after touching a one-week low against the dollar on Wednesday, ahead of two government bond auctions, with investors focused on central bank meetings this week, including the US Federal Reserve and the Bank of Russia.

At 0830 GMT, the rouble was 0.1% stronger against the dollar at 73.74, earlier clipping 73.9550, its weakest since Dec. 8. It had lost 0.1% to trade at 83.12 versus the euro.

The dollar was holding on to recent gains as investors looked towards a key US Fed policy meeting to see if it would reinforce growing market expectations for earlier and additional rate rises next year.

“Geopolitical noise” related to Ukraine remains an important factor for the rouble, but it can firm towards the 72-73 versus the dollar in the near term due to month-end taxes that prompt export-focused companies to convert FX revenues to meet local liabilities, said Dmitry Polevoy, head of investment at Locko Invest.

Russian assets have come under pressure from rising East-West tensions in recent weeks, with the United States and Western capitals voicing fears over a Russian troop buildup near Ukraine.

Uncertainty surrounding the Omicron coronavirus variant has also hampered risk appetite.

The finance ministry is in focus as it will test demand for OFZ government bonds, which usually support the rouble, at two auctions later in the day.

The rouble can also get support from the central bank that is expected to raise interest rates on Friday by hefty 100 basis points as inflation hovers near its highest since early 2016.

Higher Russian rates are positive for the rouble as they increase demand for Russian assets due to lucrative yields, protecting the currency from external shocks.

Brent crude oil, a global benchmark for Russia’s main export, was down 0.71% at $73.20 a barrel, but this did not stop Russian stock indexes from climbing higher after a recent sell-off.

The dollar-denominated RTS was up 0.7% at 1,559.1 points.

The rouble-based MOEX was 0.8% higher at 3,650.4 points, heading away from its lowest level since April of 3,532.29 hit on Tuesday.

Source: Business Recorder

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