Russian rouble settles, stocks flat as inflation data underpinned outlook

102
2
Russian rouble settles, stocks flat as inflation data underpinned outlook

A mock-up of the newly designed Russian 100 rouble banknote is on display during a presentation in Moscow.

MOSCOW Reuters -- The Russian rouble settled and stocks were flat on Thursday, despite new momentum in summer trade, while bond prices went up after inflation data underpinned expectations for another rate cut by the central bank.

The rouble was down 0.2% against the dollar at 60.77 and 61.78 against the euro at 0759 GMT.

The rouble was the world's best-performing currency this year and is expected to get more support soon from month-end tax payments that usually prompt exporters to convert part of their foreign currency revenues.

Rouble volatility has subsided after a wild swing in March saw it hit a new low of 121.53 to the dollar on the Moscow Exchange, days after Russia sent tens of thousands of troops into Ukraine on February 24 and then rally to a seven-year peak of 50.01 in June.

The yields on two-year OFZ treasury bonds, which move inversely with their prices, fell to 8.90% from Wednesday's close of 9.01%, after consumer prices fell for the sixth straight week in Russia.

If this trend doesn't reverse in September, we may see a further rate cut at the CBR's next meeting, according to BCS Global Markets.

The central bank cut its key interest rate to 8% in July and said it would study the need for more cuts as inflation slows and the economic contraction continues longer than previously thought.

Rate cuts help the bond prices and ease upside pressure on the rouble by making deposits less attractive, while supporting the stock market as investors seek more high-yielding assets to park their funds.

The dollar-denominated RTS index was down 0.05% to 1,135. 9 points. The Russian MOEX index was 0.1% higher than 2,190, according to the rouble-based MOEX. 8 points.

The Russian market is still moving in a sideways trend, with no drivers for a trend reversal yet, according to BCS Global Markets.