Russian ruble weakens as market takes stock of rate cut

A Russian one ruble coin is pictured in front of a tower of the Kremlin and Saint Basil’s Cathedral in Moscow, Russia, in this illustration photo taken June 24, 2022. REUTERS/Maxim Shemetov/Illustration

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  • This content was produced in Russia where the law limits coverage of Russian military operations in Ukraine

MOSCOW, July 25 (Reuters) – The Russian ruble weakened on Monday in choppy Moscow trading, adjusting to the central bank’s decision to cut interest rates on Friday, and as a period of payment ruble-friendly taxes peaked.

At 09:04 GMT, the ruble was 0.7% weaker against the dollar at 57.64, falling more than 1% on the day to 58.0150. It was down 0.7% to trade at 58.73 against the euro.

The ruble lost ground on Friday after Russia’s central bank cut its key interest rate 1.5 percentage points higher than expected to 8.0% and said it would consider the need for further cuts to as inflation slows and an economic contraction continues for longer than before. expected. Read more

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Analysts at brokerage Freedom Finance said on Monday that the ruble is likely to trade in the 55-57 range against the dollar.

“The weakening of the ruble after the rate cut will be short-lived, in our view,” they said.

RUBLE STRENGTH

The ruble has become the world’s best-performing currency so far this year, boosted by measures – including restrictions on Russian households to withdraw their foreign currency savings – taken to protect Russia’s financial system from imposed Western sanctions after Moscow sent troops to Ukraine on February 24.

Prior to February 24, the ruble traded at nearly 80 to the dollar and 85 to the euro.

The ruble’s strength has irked officials because it reduces Russia’s revenue from exports of raw materials and other goods priced in dollars and euros. The central bank has eased some restrictions, but many capital controls remain in place. Read more

Month-end tax payments that typically prompt export-focused companies to convert some of their foreign exchange earnings into rubles have supported the currency over the past fortnight. Monday marks the high point of this period.

The fiscal period ends this week, so the dollar-ruble pair moving above 60 cannot be ruled out, Alor Broker said in a note.

The prospect of Russia reinstating a fiscal rule that diverts excess oil revenue to its rainy day fund, as well as the market anticipating monetary interventions, also plays against the rouble. Read more

Russian stock indexes were mixed.

The dollar-denominated RTS index (.IRTS) fell 0.6% to 1,155.0 points. Russia’s ruble-based MOEX index (.IMOEX) rose 0.8% to 2,113.2 points.

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Reuters Editing reporting by Kirsten Donovan and Gareth Jones

Our standards: The Thomson Reuters Trust Principles.

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