Russian rouble firms to over 3-week high on eve of rate decision
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MOSCOW — The Russian rouble strengthened to a more than three-week high against the dollar on Thursday, with the market focused on Friday’s central bank rate meeting and keeping an eye on a security summit in Uzbekistan, featuring Russia and China.
By 0819 GMT, the rouble was 0.6% stronger against the dollar at 59.51, its strongest showing since Aug. 22. It had gained 0.9% to trade at 59.41 versus the euro , a 10-day high.
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This year, the rouble has been the world’s best-performing currency, buoyed by emergency capital controls rolled out by the central bank in a bid to halt a mass sell-off after Feb. 24 when Russia began what it calls “a special military operation” in Ukraine.
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Russian consumer prices fell for a 10th straight week, data showed on Wednesday, a decline that may cement expectations that the Bank of Russia will cut its key interest rate for the sixth time this year on Friday.
A majority of economists polled by Reuters expect the central bank to cut by 50 basis points to 7.5%, to encourage lending as inflation continues to slow.
However, other Wednesday data showed Russian households’ inflationary expectations, an indicator the central bank watches closely, rose for the second month running in September, something that could lead to a more cautious rate move.
“We had expected a rate cut on Friday of 100 basis points before publication, however now we are leaning towards a cut of only 50 basis points,” said Igor Rapokhin, chief debt market strategist at SberCIB Investment Research.
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“At the same time, we are maintaining our forecast that the key rate will be 6.5% at the end of the year.”
Russian stock indexes were edging higher.
The dollar-denominated RTS index was up 0.8% to 1,292.8 points. The rouble-based MOEX Russian index was 0.3% higher at 2,442.1 points.
Investors are waiting for news from Uzbekistan, where President Vladimir Putin plans to meet Chinese leader Xi Jinping and the Shanghai Cooperation Organisation (SCO), a regional security group, is gathering, said Veles Capital analysts.
“For Russian companies, the search for new, more reliable partners is a positive factor,” said Veles Capital. (Reporting by Alexander Marrow Editing by Mark Heinrich and Peter Graff)
