MOSCOW: The rouble firmed versus the dollar to its strongest level in seven weeks at Friday's opening, boosted by preparations for the last tax payment this month ahead of the central bank's decision on interest rates.
The central bank is widely expected to leave all key interest rates unchanged amid easing inflationary pressure at a time that uncertainty about repercussions of euro zone financial woes persists.
The market will be closely watching the central bank's statement in the light of recently strained money market conditions where interbank overnight rates have soared above 5.0 percent to their highest since early 2010 .
"We do not rule out that the bias of the policy statement could be fairly dovish as de facto 150-200bp policy tightening has happened during the last couple of months," analysts at VTB Capital said in a note.
"Market rates are now anchored by the minimum cost of the direct repo with the central bank (5.25 pct), rather than the deposit rate (3.75 pct)."
The rouble, which firmed 0.24 percent to its strongest since Sept. 9 of 29.88 per dollar by 0616 GMT, is unlikely to show substantial reaction to the central bank's decision as it was already priced in, market players say.
The Russian unit had added 0.05 percent to 42.38 versus the euro and gained 0.1 percent to 35.50 against the euro-dollar basket, its strongest since mid-September.
"We expect the rouble to stabilise at the current levels versus the basket, with some potential to weaken a bit once the October tax period ends," VTB Capital said.
Export-focused companies usually convert dollars and euros into roubles closer to the month-end to meet local tax duties.
The dollar-based RTS and the rouble-traded MICEX indexes were gaining 0.6 and 0.9 percent respectively, tracing globally improved risk perception after markets welcomed Thursday's euro zone summit deal to contain the region's debt crisis.
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