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Russia questions rouble's carry trade appeal
March 6, 2017 / 2:11 PM / 9 months ago

Russia questions rouble's carry trade appeal

MOSCOW, March 6 (Reuters) - The rouble’s appeal for carry trade is probably overstated, analysts at Russia’s central bank said on Monday.

The appeal of carry trade transactions with the rouble, where players borrow currencies such as dollars cheaply and invest them into high-yielding rouble instruments, is limited by currency risks, the analysts said.

The comments follow a series of official statements indicating that Russian authorities see limited room for the rouble’s further strengthening.

In a monthly research note, the central bank’s analysts said the rouble’s strengthening this year was mostly caused by supply of foreign currency from export-focused companies.

Seasonality also played into the rouble’s hands: the rouble firmed against the dollar in the first quarter 10 times in the past 15 years.

The central bank said the market’s reaction to the finance ministry’s decision to start buying foreign currency was limited. The bank said its moderately tight monetary policy had not only lowered economic uncertainties but also helped to contain inflationary risks from the state forex purchases.

“Thus the current balance of inflationary risks speak for a very smooth easing of monetary policy, which should remain moderately tight,” the research note said.

The central bank analysts also increased the average oil price seen in the second quarter to $50 per barrel from a previously expected level of $40, adding that a recovery in consumer and investment demand had already exceeded initial expectations. (Reporting by Andrey Ostroukh; Editing by Alexander Winning)

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