MOSCOW: The Russian rouble rallied to its strongest level since June 2020 against the euro on Friday after an unexpected central bank rate cut, while stock indexes were mixed after the US congress voted to ban Russian oil.
The central bank cut its key interest rate to 17% from 20% in a surprise move ahead of a regular board meeting scheduled for April 29, and said it was open to possible further cuts at upcoming meetings.
The rouble quickly returned to gains after easing slightly following the move, which partially reversed the emergency rate hike that the central bank delivered in late February after Russia had started what it calls “a special military operation” in Ukraine on Feb. 24.
By 1116 GMT, the rouble gained 1.8% to 74.42 against the dollar, inching closer to its strongest level since Feb. 11 of 74.2625 hit on Thursday.
Against the euro, the rouble rallied by nearly 3% to 79.10 after briefly touching the 79 mark for first time since late June 2020.
Yields on 10-year OFZ treasury bonds, which move inversely to their prices, fell to 10.93% from 11.62% seen before the rate move.
The surprise rate decision followed comments by Finance Minister Anton Siluanov who said this week his ministry was working with the central bank on measures to make the rouble exchange rate more predictable and less volatile.
“If the experience of the 2014/15 rouble crisis is any guide, a large interest rate cut (like that seen today) is likely to be followed by much more gradual easing as the CBR targets a large positive real interest rate to bring inflation back down to its target,” Capital Economics said in a note.
LockoInvest firm said it has revised its year-end rate forecast to 11-12% from not more than 15%.
Moves in the rouble remain jittery and trading volumes on the Moscow Exchange are below average, but the rouble has fully recovered to levels seen before Russian troops entered Ukraine. The rouble is supported by Russia’s strong current account surplus amid high commodity prices as well as Russia’s capital controls, said Olga Belenkaya, head of macro research at Finam brokerage.