Russian rouble firms, supported by bond auctions

MOSCOW: The rouble strengthened on Wednesday ahead of a long holiday weekend in Russia, supported by results of government bond auctions.

At 1454 GMT, the rouble was 0.49 percent stronger against the dollar at 65.08 and had gained 0.33 percent to trade at 72.91 versus the euro.

With the Moscow Exchange closed and many traders away from their desks, trading has been, and is set to remain, subdued.

Markets will be closed on Thursday for Victory Day with many participants taking a long weekend.

The Russian rouble was supported by demand for government bonds, known as OFZ. On Wednesday, Russia's Finance Ministry sold a combined 99.31 billion roubles worth of OFZ bonds maturing in 2026 and 2022 in two auctions.

Demand for OFZ bonds, which serves as a gauge for global sentiment toward Russian assets, has soared in recent months after uncertainty surrounding possible new US sanctions on holdings of Russian debt.

Appetite for Russian bonds has been supported by market expectations that the central bank may lower its key rate in the second or third quarter, said Dmitry Gritskevich, an analyst at Promsvyazbank.

"Further prospects are less clear, as foreign investors have largely restored Russia's positioning in their portfolio after the 2018 sell-off, while the overall emerging market risk appetite seems to have saturated," said Dmitry Dolgin, chief economist at ING Bank in Moscow.

The Finance Ministry also increased daily purchases of foreign currency for state reserves on Wednesday.

Total FX purchases on the market will be at 300.5 billion roubles between May 14 and June 6, compared with 255.4 billion in the previous month.

Analysts polled by Reuters had expected a higher increase, following a rise in global oil prices.

The purchases in May could be smaller than expected because of issues with contaminated crude in the Druzhba oil pipeline, said Dolgin from ING Bank.

Russia halted oil flows along the Druzhba pipeline to Eastern Europe and Germany in April because of contaminated crude, contributing to a rise in global oil prices and leaving refiners in Europe scrambling to find supplies.

Brent crude oil, a global benchmark for Russia's main export, was up 0.63 percent at $70.31 a barrel on Wednesday.

Russian stock indexes were lower with the dollar-denominated RTS down 0.16 percent to 1,235.77 points and the rouble-based MOEX 0.44 percent lower at 2,553.99 points.