Rouble and equities strengthen as oil prices recover

MOSCOW: The Russian rouble firmed on Monday, heading away from a one-month low against the dollar thanks to a recovery in oil prices that also buoyed equities markets.

At 0719 GMT the rouble was up 0.2% against the dollar at 74.10, having hit 74.5950 on Friday for its weakest since July 20. Versus the euro, the rouble added 0.2% to 86.75.

"We think the rouble could recover to USD/RUB 73.7 today amid a globally weak dollar," Sberbank CIB said in a note.

There was little currency reaction to last Friday's meeting between President Vladimir Putin and German Chancellor Angela Merkel, who discussed jailed Kremlin critic Alexei Navalny, the Nord Stream 2 gas pipeline and Afghanistan.

This week the market will be looking for clues on interest rates ahead of the Russian central bank's board meeting on Sept. 10. The bank raised its key rate last month by 100 basis points to 6.5% for its sharpest increase since 2014.

As the central bank fights stubbornly high inflation with monetary tools, Putin on Sunday pledged one-off payments of 10,000 roubles ($134.90) and 15,000 roubles to military personnel ahead of September's parliamentary election.

VTB Capital said the central bank is likely to view these payments as similar to the one-off remittance of 5,000 roubles in 2017, potentially accelerating inflation in the short term.

Brent crude oil, a global benchmark for Russia's main export, was up 2% at $66.47 a barrel, supporting Russian markets. Oil was recovering from a seven-day losing streak as investors hunted for bargains and a softer dollar lent support, though anxiety over surging cases of the Delta coronavirus variant kept sentiment cautious.

The dollar-denominated RTS index was up 1.3% at 1,644.1 points after a sharp drop last week. The rouble-based MOEX Russian index was 0.9% higher at 3,866.2 points, moving towards a record high of 3,949.07 hit last week.