MOSCOW: The rouble jumped 1% at one point on Thursday after Russia's central bank governor hinted at a sharp rate rise this month and the foreign ministry said it hoped a summit between President Vladimir Putin and U.S. President Joe Biden would take place in the coming days.
The rouble rose to as high as 73.5225 versus the dollar, its strongest since Nov. 22, before giving up some gains.
At 1351 GMT, it was 0.6% stronger against the U.S. dollar at 73.85 and was flat at 83.71 versus the euro .
Central Bank Governor Nabiullina said in an interview at the Reuters Next conference that the bank would consider a sharp rate increase this month of up to 100 basis points.
The prospect of a possible summit between Russia and the United States, meanwhile, could be helpful as bilateral tensions are under renewed pressure from what Ukraine and the West say is a Russian troop buildup near Ukraine.
Analysts polled by Reuters in late November had on average expected the central bank to raise the key rate by 50 basis points to 8% at the Dec. 17 meeting.
Rouble stabilises near 74 vs dollar, stocks climb
But chances of a sharper move increased after data showed consumer inflation, the central bank's main area of responsibility, hit 8.38% in late November, nearing a six-year peak and hovering far above the 4% target.
Higher rates are positive for the rouble as they increase demand for Russian assets thanks to lucrative yields, and thus protect the currency from external shocks.
The rouble has slipped from a multi-month peak of 69.21 versus the greenback hit in late October as it took a hit from concerns about possible Russian military intervention in Ukraine, a prospect that Moscow has dismissed.
The rouble should average 74 to the dollar in December and 72.60 in February 2022 if foreigners' share in Russian government bonds remains flat, oil stays near $70 a barrel and no widening of the emerging market external risk premium takes place, VTB Capital said in a note, citing its FX model.
Russian stock indexes were down. The RTS index shed 0.3% to 1,680.8 points. The MOEX Russian index was 0.5% lower at 3,938.4 points, remaining below the 4,000 mark for more than a week.
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