Rouble firms vs dollar to strongest since July

MOSCOW: Russia's rouble pared earlier losses and firmed on Tuesday to its strongest level against the dollar since late July, buoyed by a recent recovery in global oil prices and the payment of local month-end taxes.

The rouble was 0.3% stronger against the dollar at 72.62 as of 1226 GMT, after hitting its highest since July 29 of 72.53. The currency gained 0.2% to 86.72 against the euro, its strongest level since mid-August.

The rouble is seen moving towards the 72.00-72.50 target against the dollar in coming weeks as concerns over Western sanctions recede into the background, said Dmitry Polevoy, head of investment at Locko Invest.

But the geopolitical premium for the rouble remains significant, putting the central bank's board meeting on Friday in the spotlight. The rouble traded at about 61 to the dollar in early 2020 when oil prices were last near current levels.

The Russian currency received some support this week from reports that the central bank may start increasing rates sooner rather than later.

Higher rates make holdings of rouble bonds more attractive and may lead to inflows of capital into Russian markets.

The majority of analysts polled by Reuters this week said Russia's central bank (CBR) is likely to hold the key rate at 4.25% on Friday and may raise it in the coming months. .

"We still think that CBR will keep the key rate on hold at this week's meeting, although it could begin to tighten its stance as soon as April if price pressures continue to build," said Artem Zaigrin, chief economist at Sova Capital.

Brent crude oil, a global benchmark for Russia's main export, was down 1.5% at $67.83 a barrel, extending declines to three consecutive days, as rising US stockpiles added to the risks facing a demand recovery after Germany, France and others halted AstraZeneca COVID-19 vaccinations amid health concerns.

Russian stock indexes felt the pressure from lower oil prices.

The rouble-based MOEX Russian index fell 0.8% on the day to 3,555.0, heading away from an all-time high of 3,602.18 it reached on Monday.

The dollar-denominated RTS index shed 0.1% to 1,542.1 points.