Russian rouble firms vs dollar as market takes stock of rate hike

The Russian rouble edged up on Monday, firming past 97 to the dollar as the market took stock of Friday's rate rise to 13% and after the redemption of $3 billion worth of Russian Eurobonds over the weekend.

The Russian rouble edged up on Monday, firming past 97 to the dollar as the market took stock of Friday's rate rise to 13% and after the redemption of $3 billion worth of Russian Eurobonds over the weekend. The Bank of Russia jacked up the cost of borrowing for the third meeting in succession on Friday in response to the weak rouble, which tumbled past 100 to the dollar last month, and other persistent inflationary pressures.

By 1045 GMT, the rouble was 0.4% stronger against the dollar at 96.43 and steady versus the euro , trading at 102.90. It had firmed 0.4% against the yuan to 13.20. "The next couple of days may be decisive for the rouble," said Alor Broker analyst Alexei Antonov.

The central bank sharply increased its foreign currency sales for a week starting on Sept. 14, seeking to compensate for the planned redemption of $3 billion worth of Russian Eurobonds on Sept. 16. The bank said it expected some holders, who would be paid in roubles, to convert into foreign currency.

"Let's see what part of the funds received by domestic investors will again be directed to foreign currency," Antonov said, warning that the rouble returning to 100 against the dollar could not be excluded. Authorities are discussing whether to reintroduce stringent currency controls to support the rouble, but Central Bank Governor Elvira Nabiullina on Friday warned such steps were inefficient and would ultimately be circumvented.

Eurobonds and the central bank's FX sales will affect the rouble this week, said Promsvyazbank analysts, likely keeping the Russian currency in the 95.5-98.5 range against the dollar. Month-end taxes, when exporters usually convert FX revenues to pay local liabilities, should give the rouble additional support next week, they added.

Brent crude oil, a global benchmark for Russia's main export, rose 0.6% to $94.45 a barrel, a 10-month high. The dollar-denominated RTS index was down 0.1% at 1,028.3 points. The rouble-based MOEX Russian index was 0.1% lower at 3,148.0 points.

"Despite the restrained optimism with which investors reacted to the regulator's (interest rate) decision, we suggest that with high rates, pauses in dividend payments and falling prices for rouble bonds, it is hard for the stock market to continue growing," said Sinara Investment Bank in a note.