Russian rouble falls ahead of expected rate cut by central bank
2022.07.22 13:49
FILE PHOTO: Russian 1000-rouble banknotes, 50 and 10 kopeck coins are seen on a table at a private company’s office in Krasnoyarsk, Siberia November 6, 2014. REUTERS/Ilya Naymushin/File Photo
MOSCOW (Reuters) – The Russian rouble fell to 58 against the dollar on Friday ahead of the central bank’s rate-setting meeting where it is expected to deliver the fourth cut so far this year.
At 0958 GMT, the rouble was 2.2% weaker against the dollar at 57.88 after briefly hitting 58.06. Against the euro, it eased 1.5% to 58.09 on the Moscow Exchange.
The rouble has become the world’s best-performing currency http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html so far this year, boosted by measures – including restrictions on Russian households withdrawing foreign currency savings – taken to shield Russia’s financial system from Western sanctions imposed after Moscow sent troops into Ukraine on Feb. 24.
Before Feb. 24, the rouble traded near 80 to the dollar and 85 to the euro.
The rouble’s strength has concerned officials as it dents Russia’s income from exports of commodities and other goods priced in dollars and euros.
To ease upside pressure on the currency, Russia relaxed some capital controls this week, allowing banks from designated “unfriendly countries” to trade between foreign currencies on the Russian forex markets.
The central bank, which supports the idea of a free-floating rouble, can further ease upside pressure on the currency in the long run by cutting rates later on Friday and thus trimming yields of rouble-denominated bonds.
“The Bank of Russia is likely to cut the key rate from the current level of 9.5%, which should have a positive effect on the stock and bond markets,” BCS Global Markets said in a note.
The majority of analysts polled by Reuters in mid-July had expected the central bank to cut the key interest rate by 50 basis points but the latest data on inflation and inflationary expectations raised chances for a sharper cut.
The central bank will announce its rate decision at 1030 GMT and Governor Elvira Nabiullina will shed more light on monetary policy and other issues at a media conference at 1200 GMT.
The rate decision and the bank’s message to the market may not have an immediate impact on the rouble but can move prices on the bond market, especially given the finance ministry’s plans to return to borrowing via OFZ bonds in September after halting weekly bond auctions in February.
In stock markets, the dollar-denominated RTS index slid 0.7% to 1,134.7 points. The rouble-based MOEX Russian index rose 1.4% to 2,081.8.
