September 13, 2012 / 4:17 PM / 5 years ago

UPDATE 1-Rouble firms on rate hike, rising oil prices

* Rouble firms after central bank raises rates
    * Brent crude prices climb above $116.5
    * All eyes on the U.S. Fed meeting results
    * Stocks indexes mixed; Sistema up after Q2 results


    By Andrey Ostroukh
    MOSCOW, Sept 13 (Reuters) - The rouble firmed on Thursday, boosted by an
unexpected interest rate hike by the central bank and by oil prices which rose
on expectations that the U.S. Federal Reserve would announce more monetary
stimulus for the world's biggest oil buyer.
    Russia's central bank raised all of its key interest rates by a quarter
point, in a surprise move that reflected its concern about inflation after
consumer price growth overshot its 6 percent target. 
    Higher rates are set to boost the rouble's attractiveness by propping up
Russia's assets yields and by increasing its appeal for carry trade operations
where low-yielding currencies are borrowed to buy into higher yielders.
    By 1452 GMT, the rouble gained 0.7 percent to 31.30 versus the dollar
 compared to levels of around 31.42 before the rate decision.
    Against the euro, the rouble added 0.6 percent to 40.37 and
strengthened 0.6 percent to 35.38 versus the euro-dollar basket,
propped up by a rise in Brent crude prices above $116.5 per barrel.
    Although the central bank's decision supported the rouble, it was seen by
some analysts as inconsistent at a time of downside risks to economic growth.
    "While the decision will boost rouble-denominated assets, in particular
because it was not expected, it may also invite reasonable questions about
whether the central bank has deep understanding about how inflation-targeting
operates," Ivan Tchakarov, chief economist at Renaissance Capital, said in a
note.
    "A rate hike will affect lending which will have negative consequences for
the stock market, economy," said Anton Struchenevsky, an analyst at Troika
Dialog.
    After Russia's market close investors will be watching the Fed which appears
set to launch a third round of unconventional monetary stimulus while signalling
that a weak U.S. economy may warrant ultra-low interest rates for at least
another three years. 
    "Today the market activity could be the lowest so far this week as no one
would take risks before the Fed decision," said Alexei Vorobyov, chief dealer at
Vozrozhdenie bank. 
    In the stock market, the rouble-traded MICEX index shed 0.4 percent to
1,472.5 points and its dollar-based peer RTS was up 0.16 percent at
1,484.9, hovering at its strongest since early May.
    "Stock prices have already priced in a possibility of quantitative easing by
the Fed but it's unclear when it will take place, maybe at the end of the year,"
said Enver Bilyalov, a trader at Prospect investment company.
    "I prefer to hold to a no-risk positions, keeping 50 percent of funds in
cash. If a rally starts it won't be long-lived. I personally don't believe in a
strong rally," he said.
    Shares in Russian holding company Sistema  inched up 0.4
percent after the company said it swung to a $161.9 million net loss in the
second quarter, hit by a $1.1 billion write-off at its mobile unit MTS,
whose license was suspended in the central Asian state of Uzbekistan.
 

 Russian                             Latest   Net     % Change  % Change
   Markets                                    Change            year-to-date
 STOCKS                                                         
 MICEX                               1472.60  -5.94   -0.40     5.02
 RTS                                 1484.88  2.37    0.16      7.45
 London ADRs                         864.84   2.09    0.24      11.10
 Emrg Mkt Indx                       977.55   -0.93   -0.10     6.67
 MSCI Russia                         805.91   1.50    0.19      9.39
 Sberbank                            92.75    -0.83   -0.89     17.61
 VTB                                 0.06     -0.00   -0.95     -3.60
 Gazprom                             162.99   -0.22   -0.13     -4.85
 LUKOIL                              1938.00  -7.00   -0.36     13.83
 Rostelecom                          126.49   -0.61   -0.48     -16.78
 Dollar/Rouble                       31.30    -0.21   -0.67     -2.64
 Euro/Rouble                         40.37    -0.23   -0.57     -3.28
 Rouble basket                       35.38    -0.22   -0.62     -2.97
 DEBT                                Bid      Ask     %Rtn      Coupon
 Russia 10-yr bond                   7.79     7.77    0.06      7.60
 MONEY MARKET                        Bid      Ask     Close     
 Overnight rate                      5.10     5.60    4.84      
 All data taken from Reuters at 1452 GMT

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