Russian rouble hits 15-month high vs euro, firms past 70 vs dollar

MOSCOW: The Russian rouble firmed to a more than 15-month high versus the euro and strengthened past 70 to the dollar on Monday, gaining thanks to rallying oil prices and Friday's sharper-than-expected rate hike by the central bank.

By 1048 GMT, the rouble had gained 0.8% to trade at 81.26 versus the euro, its strongest point since July 2020.

It was 0.6% stronger against the dollar at 69.91 , edging back towards Friday's high of 69.8150, its strongest mark since June 29, 2020.

The rouble jumped past 70 versus the greenback on Friday after the central bank surprised markets in delivering a larger-than-expected 75 basis points interest rate rise to 7.5%, increasing the cost of lending for the sixth time this year as it struggles to rein in inflation.

Analysts from Promsvyazbank said they expected the rouble to try to get a foothold below the 70 mark to the dollar on Monday.

Higher rates are positive for the rouble, which is also supported by month-end tax payments that prompt export-focused companies to convert some of their revenues to meet local liabilities.

While the rouble firmed, Russia's treasury bonds fell. Yields on the government's 10-year benchmark OFZ bonds, which move inversely to their price, jumped after the rate hike and tracked higher on Monday, hitting 8%, their highest since March 2020.

OFZs, which Russia uses to plug budget holes, have regained popularity among foreign investors as fears about sanctions have waned and on expectations their prices could rise higher once the central bank starts cutting rates at some point next year.

Analysts from SberCIB Investment Research said yields on OFZs were excessively high and that they saw reasons to expect the 10-year yield to return to 7% next year.

Brent crude oil, a global benchmark for Russia's main export, was up 0.7% at $86.16 a barrel, climbing to a multi-year high on tight global supply and providing support for Russian stock indexes.

The dollar-denominated RTS index was up 1.4% to 1,904.3 points. The rouble-based MOEX Russian index was 0.7% higher at 4,226.0 points.