Rouble hits 15-month high vs dollar before central bank rate decision

Updated 22 Oct, 2021

MOSCOW: The Russian rouble firmed to its strongest level in 15 months on Friday as the market awaited the central bank's rate-setting meeting and kept an eye on surging COVID-19 cases that have already prompted authorities to announce lockdown measures.

At 0831 GMT, the rouble gained 0.6% to 70.71 the dollar , a level last seen on July 21, 2020. It also firmed 0.4% to trade at 82.32 versus the euro.

The central bank is widely expected to raise its key rate from 6.75%, increasing the cost of lending for the sixth time so far this year as it struggles to rein in inflation, its main area of responsibility.

Higher rates are positive for the rouble, making it the highest-yielding currency, with the exception of the Turkish lira.

The rouble is also supported by month-end tax payments that prompt export-focused companies to convert part of their revenues to meet local liabilities.

"We see the rouble reaching USD/RUB 70.5 today amid a key rate hike and elevated exporter FX sales," Sberbank CIB said in a note.

Chances for a rate hike increased after inflationary expectations for the year ahead among households jumped to 13.6%, far above the 4% inflation target.

Russian rouble firms past 71 vs dollar

"We believe inflation expectations support our forecast of a 50 bps rate hike by CBR today despite the upcoming lockdowns in Moscow and the Moscow Region, with other regions potentially following Moscow's example," Sova Capital said in a note.

As Russia's death toll from COVID-19 hit record highs, Moscow decided to reintroduce lockdown measures from Oct. 28, with supermarkets and pharmacies the only shops allowed to stay open. Some other regions have announced similar measures.

Lockdowns and related restrictions could hurt the economy just as it is facing the risk of more expensive lending.

The central bank will announce its rate decision at 1030 GMT and Governor Elvira Nabiullina will present it along with revised economic forecasts at 1200 GMT.

Russian stock indexes were up.

The dollar-denominated RTS index rose 1.1% to 1,889.7 points. The rouble-based MOEX Russian index was 0.5% higher at 4,238.8 points, near an all-time high of 4,292.68 hit last week.

Read Comments