June 14, 2019 / 7:48 AM / 6 days ago

Russian rouble firms ahead of c.bank rate decision

MOSCOW, June 14 (Reuters) - The Russian rouble firmed against the U.S. dollar in early trade on Friday on investor expectations that the central bank will cut the key interest rate in a bid to counter sluggish economic activity through cheaper lending .

At 0718 GMT, the rouble gained 0.2% to 64.44 against the dollar after briefly hitting its strongest level since late May of 64.58.

A Reuters poll showed this week that the central bank is likely to trim the key rate to 7.50% at its regular board meeting, delivering its first cut since March 2018.

A rate cut on Friday and chances of further monetary easing amid slowing inflation mean that prices for Russia’s OFZ treasury bonds will climb in the future, making them more attractive for investors to buy into now.

Demand for these bonds, a gauge of global market sentiment toward Russian assets, generally support the rouble.

The rate decision is due at 1030 GMT and will be followed by a news conference where Governor Elvira Nabiullina is expected to shed more light on the monetary policy outlook.

“The rate will most likely be cut 0.25 percentage points and the central bank can signal further easing over the year given that inflation is down to 5% and the situation on the financial markets is conducive to a rate cut,” said Georgy Vashchenko, head of market operations at Freedom Finance.

Versus the euro, the rouble gained 0.2% to trade at 72.66 .

Brent crude oil prices, which usually buttress the rouble, on Friday extended gains from the previous day following attacks on two oil tankers in the Gulf of Oman that stoked concerns of reduced crude flows through one of the world’s main shipping routes.

Russian stock indexes were stable.

The dollar-denominated RTS index was up 0.2% to 1,350 points, while the rouble-based MOEX Russian index was unchanged at 2,760 points.

For Russian equities guide see

For Russian treasury bonds see (Reporting by Gabrielle Tétrault-Farber Editing by Andrey Ostroukh and Andrew Cawthorne)

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