Russian ruble companies anticipate lower interest rates

The Russian ruble strengthened on Friday, heading back to a more than two-week high in the previous session on support from capital controls, as the market waited for an expected central bank rate cut.

As of 0724 GMT, the ruble was up 1.1% against the dollar at 58.71, not far from 57.4075 on Thursday, its strongest since May 25.

It had gained 2.1% to trade at 61.96 against the euro, also close to a two-week high.

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The central bank is expected to cut interest rates, which in theory could put downward pressure on the ruble and support OFZ treasury bill prices.

A majority of analysts polled by Reuters expect rates to fall by 100 basis points to 10% as the bank tries to make loans more affordable amid sluggish consumer demand and a pause in lending. inflation, although some have suggested a sharper cut to 9% is possible. .

The rate decision is scheduled for 10:30 GMT, followed by a press briefing with Governor Elvira Nabiullina at 12:00 GMT.

The central bank’s decision is unlikely to affect the ruble rate, given the existing restrictions on capital flows, said Alfa Capital analyst Alexander Dzhioev.

“Nevertheless, it should be noted that in combination with other factors, for example the abolition of mandatory sales of foreign exchange earnings by exporting companies, the currency may stop strengthening,” he said.

President Vladimir Putin on Thursday signed a decree that the market interpreted as a potential way for export-focused companies to reduce foreign currency conversion.

Capital controls forced exporters to convert 80% of their earnings into rubles after Russia sent tens of thousands of troops to Ukraine on February 24. This ratio was then lowered to 50% in May.

Russian stock indexes were mixed.

The dollar-denominated RTS index rose 1.1% to 1,226.7 points. Russia’s ruble-based MOEX index was down 0.4% at 2,285.9 points.

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Stephen V. Lee