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  • Writer's pictureanalysiswatch

Title: Russian rouble firms vs dollar, OFZ bonds near 2-month highs

Apr 19, 2022 04:25AM ET

By: AnalysisWatch

The Russian ruble strengthened against the dollar in early trading on Tuesday, while OFZ government bond prices rose to their highest level since Feb. 21 on expectations that the central bank would soon cut interest rates again. At 0738 GMT, the ruble was 0.6% stronger against the dollar at 79.30, while it eased 0.2% against the euro to trade at 83.97 after briefly touching 82.60 on Monday, its highest level since April 8. The ruble's movements are artificially limited by capital controls that Russia imposed in late February in response to the blow to its financial sector and economy from unprecedented Western sanctions. The sanctions are intended to punish Moscow for sending tens of thousands of troops into Ukraine on Feb. 24. In the bond market, where non-residents have not been allowed to sell paper since late February, the yield on 10-year OFZ benchmark bonds fell to 10.36% from around 11.6% a week ago, moving inversely to their prices. At the next board meeting on April 29, Governor Elvira Nabiullina said the central bank should work to increase the availability of credit to the economy and hinted that she would consider lowering the key interest rate from 17%. Nabiullina also warned that the Russian economy would enter a phase of "structural change" in the second and third quarters, which analysts said would mean a deep and rapid economic contraction. In just two quarters, the Russian economy could lose all the gains it made between 2012 and 2021, said Evgeny Suvorov, an economist at CentroCreditBank, predicting that the central bank would cut its key interest rate to 15% next week.

Russian stock indexes were down. Russia's ruble-based MOEX index fell 1.4% to 2,310.3 points, a level last seen on Feb. 25, before the central bank suspended stock market trading for nearly a month. The dollar-denominated RTS index fell 1% to 916.2 points.

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