MOSCOW: The Russian rouble strengthened against the U.S. dollar on Wednesday as markets focused on the central bank’s key rate decision later this week, though analysts said any dovish signals could trigger a weakening of the currency.
By 1045 GMT, the rouble was up 0.8% at 78.35 per U.S. dollar, LSEG data based on over-the-counter quotes showed. The rouble has rallied by over 40% against the dollar so far this year.
Reuters poll of 26 economists showed on June 2 that the central bank is expected to keep its key interest rate on hold at 21% at its board meeting on June 6, but may soften its rhetoric and signal rate cuts later in the year.
However, a growing number of analysts predict that the central bank, which is under pressure from businesses over an economic slowdown and the high cost of lending, may start cutting rates at Friday’s meeting.
“The geopolitical factor has temporarily taken a back seat, and foreign exchange market participants are now preparing for the central bank’s key interest rate decision,” BCS brokerage analysts said.
Russian rouble strengthens slightly vs US dollar after Ukraine talks in Istanbul
The Finance Ministry published figures for forex transactions for the National Wealth Fund which imply an increase on net foreign exchange sales by the state, providing more support for the rouble.
Against the Chinese yuan, the rouble was up 0.3% at 10.87 on the Moscow Stock Exchange. Russia’s central bank uses yuan for foreign exchange interventions, and it is the most traded foreign currency in Russia.
Analysts believe that the rouble is fundamentally overvalued and see the Russian currency weakening to 97.5 to the dollar in one year.
Comments
Comments are closed for this article.