Russian rouble steady vs dollar ahead of expected c.bank rate hike

MOSCOW — The rouble steadied near 75 against a rising dollar on Friday, not far from its strongest mark since early January, with tensions over Ukraine staying firmly in focus as traders awaited an expected rate hike by Russia’s central bank.

At 0711 GMT, the rouble was unchanged against the dollar at 75.01, close to its strongest point since Jan. 3 of 74.2550 hit in the previous session.

The greenback was stronger globally after hotter-than-expected U.S. inflation and hawkish comments from a Federal Reserve official unleashed a wave of bets on aggressive rate hikes.

The rouble had gained 0.8% to trade at 85.32 versus the euro .

The Bank of Russia is expected to raise its key rate on Friday to 9.5%, a Reuters poll showed, as it grapples with accelerating inflation. It could also shed light on when it may resume foreign exchange purchases on the domestic market after halting them on Jan. 24.

The 100-basis-point hike is fully priced in and unlikely to impact Russian markets, said Evgeny Suvorov, an economist at CentroCreditBank.

“But the central bank will also present a forecast today,” he added. “It is the forecast figures that can have a meaningful impact on market expectations and quotes.”

Russian assets remain sensitive to tensions over Ukraine, although the rouble has wiped out most of the losses sustained this month.

Britain said on Thursday the “most dangerous moment” in the West’s standoff with Moscow appeared imminent, as Russia held military exercises in Belarus and the Black Sea following the buildup of its forces near Ukraine.

“Shuttle diplomacy by the West and Russia has thus far brought more hard liner rhetoric than olive branches, prompting an uptick in saber rattling,” BCS Global Markets said in a note.

Russian stock indexes opened lower.

The dollar-denominated RTS index was down 2.5% to 1,509.0 points. The rouble-based MOEX Russian index was 1.6% lower at 3,596.4 points.

Shares in oil major Rosneft lost 0.5%, outperforming the wider market, after reporting sixfold increase in net income last year.

“Buyers are no longer so sure of themselves: the geopolitical element is factored into prices and no new reasons to buy have appeared,” said Alfa Capital. (Reporting by Alexander Marrow and Andrey Ostroukh; editing by David Evans)