June 22, 2020 / 12:10 PM / 20 days ago

CORRECTED-UPDATE 2-Russian rouble firms, modest demand at cenbank's rare one-year repo auction

(Corrects name of Sberbank Asset Management expert in paragraph 5 of story from June 22)

By Alexander Marrow

MOSCOW, June 22 (Reuters) - The Russian rouble firmed against the dollar on Monday, with rising risk appetite pushing aside fears of a second wave of COVID-19, while the central bank saw limited demand in a rare one-year repo auction.

By 1512 GMT, the rouble was 0.2% stronger against the dollar at 69.30 but had lost 0.5% to trade at 78.01 versus the euro.

Brent crude oil, a global benchmark for Russia’s main export, was up 0.7% at $42.47 a barrel.

A surge in cases of the novel coronavirus in the United States worried investors in some markets, but Russian assets turned positive after a steady start to the trading session.

“In the near future, the main factors on the movement of the rouble will remain oil price dynamics and the general mood of global investors to emerging market assets,” said Renat Malin of Sberbank Asset Management.

The Bank of Russia cut its benchmark interest rate by 100 basis points to a record low of 4.5% on Friday amid waning inflation, but analysts warned the sharp cut to the cost of borrowing might not spark a strong resurgence for Russia’s shrinking economy.

The central bank tested the more favourable borrowing environment with a rare one-year repo auction. Contrary to VTB Capital expectations for strong demand at the auction, the central bank provided only 5.1 billion roubles ($73 million) to banks, well short of 400 billion roubles on offer.

It also cancelled a one-month repo auction, citing a lack of bids. The central bank usually holds one-week repo auctions.

Sofya Donets, chief economist at Renaissance Capital, in explaining the poor demand for long-term liquidity, said banks were used to the central bank satisfying refinancing needs with weekly auctions and fine-tuning operations.

“In this system, credit institutions in principle have no additional stimulus to use long-term instruments. Especially in expectation of further rate cuts,” she added.

Russian stock indexes were rising.

The dollar-denominated RTS index had risen 0.4% to 1,254.6 points. The rouble-based MOEX Russian index was 0.1% higher at 2,760.3 points.

A public holiday on Wednesday means trading activity is likely to be lower than during a usual week.

For Russian equities guide see

For Russian treasury bonds see ($1 = 69.5024 roubles) (Additional reporting by Elena Fabrichnaya and Andrey Ostroukh; Editing by Alex Richardson and Pravin Char)

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