Ruble hits 2-year high against euro in Moscow as market waits for rate cut

A customer hands over Russian ruble banknotes and coins to a vendor at a market in Omsk, Russia October 29, 2021. REUTERS/File Photo

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April 29 (Reuters) – The Russian ruble hit its highest level in more than two years against the euro on Friday and headed towards 70 to the dollar before paring gains, buoyed by capital controls and then that the market was waiting for a rate cut expected by the Central Bank.

The moves in the Russian market are partly artificial, as the ruble is backed by capital controls, while stocks trade with a ban on short selling and with foreign players banned from dumping shares in Russian companies without authorization.

As of 0953 GMT, the ruble had gained 1.1% to trade at 74.55 against the euro, earlier touching 74.0525, its highest level since March 2020.

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It was 1.6% stronger against the dollar at 70.92, before climbing to a six-month high at 70.9075.

The ruble has strengthened in recent days as export-focused companies sell their foreign currency earnings to meet local liabilities that could top 3 trillion rubles ($43.26 billion) this month, according to analysts polled by Reuters.

Sberbank CIB analysts said exporters could significantly reduce foreign exchange sales ahead of Russia’s long May holiday.

“The ruble could slip to 74-75 against the dollar today,” Sberbank CIB said.

The Bank of Russia is expected to cut its key interest rate by 200 basis points to 15% as it tries to further stimulate lending in the economy in the face of high inflation, a Reuters poll suggested earlier this week.

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

Lower rates support the economy through cheaper loans, but can also stoke inflation and make the ruble more vulnerable to external shocks.

The ruble has fully recovered to levels seen before February 24, when Russia launched what it calls a “special military operation” in Ukraine that led to unprecedented Western sanctions, including a freeze on Russian reserves and efforts to limit the access of Russian banks to the market. global financial system.

Russian stock indices were higher.

The dollar-denominated RTS index (.IRTS) rose 2.9% to 1,072.6 points. Russia’s ruble-based MOEX index (.IMOEX) rose 1.4% to 2,416.2 points.

Shares of VTB Bank (VTBR.MM) outperformed the broader market, climbing 4.1% the day after the Kommersant daily announced, citing sources, that the country’s second-largest lender might merge with banks controlled by the Otkritie State and RNCB.

Promsvyazbank analysts said the move is likely to improve VTB Group’s performance and the company’s share price, while allowing banks to optimize their branch network.

($1 = 69.3488 rubles)

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Reuters Editing reporting by Tomasz Janowski and Louise Heavens

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