Russian rouble steady, modest demand at central bank's rare one-year repo auction

MOSCOW: The Russian rouble was flat against the dollar on Monday, after a rare one-year repo auction by the central bank saw limited demand and with lingering fears of an increase in coronavirus cases weighing on riskier assets.

By 1146 GMT, the rouble was 0.1% weaker against the dollar at 69.51 and had lost 0.4% to trade at 77.92 versus the euro.

Brent crude oil, a global benchmark for Russia's main export, was down 0.4% at $42.01 a barrel.

Relatively strong oil and gold prices played in the rouble's favour but, as Alor Broker analyst Alexei Antonov pointed out, the main risk for global financial markets remains the coronavirus pandemic.

The Bank of Russia on Friday cut its benchmark interest rate by 100 basis points to a record low of 4.5% 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.

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

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

Russian stock indexes were marginally down.

The dollar-denominated RTS index had fallen 0.2% to 1,247.5 points. The rouble-based MOEX Russian index was 0.2% lower at 2,752.9 points.