MOSCOW: The rouble was stable in early trade on Tuesday, supported by demand for Russian sovereign bonds but squeezed by a higher U.S. dollar that rose on worries that the U.S.-China trade war could worsen.
At 0753 GMT, the rouble was 0.03% weaker against the dollar at 64.55. The day before it briefly hit its highest level since April 24 at 64.11.
The rouble also gained 0.06% to trade at 72.02 versus the euro.
The Russian currency was supported by higher demand for Russian OFZ treasury bonds which are seen as a gauge of global market sentiment towards Russian assets.
Demand was boosted by market expectations that the central bank will cut the key rate soon. Such expectations were reinforced on Monday after First Deputy Governor Ksenia Yudayeva said low and steady inflation was the reason for a rate cut.
Yields of 10-year benchmark OFZ bonds dropped to 8.01% after her comments, their lowest levels since August.
"A strengthening (of the rouble) and dovish remarks from the central bank ... stoked upbeat market sentiment," analysts at VTB Capital said in a note.
The results of OFZ auctions are due on Wednesday.
"Demand for OFZs is propped by demand from non-residents, and will only increase as the central bank's position softens, unless, of course, the threats from the United States come back," said Dmitry Polevoy, chief economist at Russian Direct Investment Fund.
Earlier this year, a group of U.S. senators introduced a bill containing new sanctions on Russia over its alleged meddling in U.S. elections and intervention in Ukraine. The proposal, which was not put in force, includes ban for U.S. persons in dealing with new Russia sovereign debt.
Global investors' worries that the United States and China were heading for a longer trade war may also prevent the strengthening of the rouble.
Beijing accused Washington of harbouring "extravagant expectations" for a deal to end their dispute.
"Given the external background today, the rouble is likely to trade in the range of 64.50-65.00 per dollar, however, the short-term potential for a small strengthening towards the level of 64 per dollar still remains," Polevoy said.
Brent crude oil, a global benchmark for Russia's main export, was up 0.11% at $72.05 a barrel.
Russian stock indexes were up.
The dollar-denominated RTS index was up 0.33% to 1,260.48 points. The rouble-based MOEX Russian index was 0.43% higher at 2.582.44 points.
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