Rouble falls after rallying, stocks down on new U.S. sanctions

* Russian cenbank unexpectedly cuts key rate to 17%

* Rouble rallies to strongest since June 2020 vs euro

* By day’s end, rouble reverses sharp gains and weakens

* Stocks mixed after new U.S. sanctions

April 8 (Reuters) – The Russian rouble on Friday hit its
strongest level against the euro since June 2020 after an
unexpected central bank rate cut, but soon reversed gains and
ended the day in the red, while stocks fell after the U.S.
Congress voted to ban Russian oil.

The central bank cut its key interest rate to 17% from 20%
ahead of a regular board meeting scheduled for April 29, and
said it was open to possible further cuts at upcoming meetings.

The volatile rouble rallied shortly after the rate cut,
which partially reversed the emergency rate hike that the
central bank delivered in late February after Russia started
what it calls “a special military operation” in Ukraine on Feb.
24. But the once-free-floating Russian currency finished trading
on the Moscow Exchange at levels seen on Thursday.

The rouble eased 0.4% to 76.08 against the dollar
, having briefly hit its strongest level since
November of 71.

Against the euro, the rouble shed 1.5% to 82.70 after
briefly touching 77.0750 for the first time since late June
2020.

The rouble’s rapid recovery from the record lows hit in
March raises doubts about the durability of its gains. Anyone
who tries to buy foreign currency online at a bank in Russia or,
illegally, at a foreign exchange booth, or who buys goods and
services online denominated in foreign currencies will find the
actual rate considerably worse.

Yields on 10-year OFZ treasury bonds, which move inversely
to their prices, fell to 10.77% from 11.62% seen
before the rate cut.

The surprise rate cut came after Finance Minister Anton
Siluanov said this week that his ministry was working with the
central bank on measures to make the rouble exchange rate more
predictable and less volatile.

“If the experience of the 2014/15 rouble crisis is any
guide, a large interest rate cut (like that seen today) is
likely to be followed by much more gradual easing as the CBR
targets a large positive real interest rate to bring inflation
back down to its target,” Capital Economics said in a note.

LockoInvest firm said it has revised its year-end rate
forecast to 11-12% from not more than 15%.

VOLATILE MARKETS

Moves in the rouble remain jittery and trading volumes on
the Moscow Exchange are below average, but the rouble has fully
recovered to levels seen before Russian troops entered Ukraine.

The rouble is supported by Russia’s strong current account
surplus amid high commodity prices as well as Russia’s capital
controls, said Olga Belenkaya, head of macro research at Finam
brokerage.

The rouble has recently been steered by the mandatory
conversion of dollar and euro revenues by export-focused
companies, while demand for forex is limited by a ban on buying
cash dollars and euros as well as by a 12% commission on buying
forex online or through a bank.

Given the latest rouble firming, some recovery in demand for
FX is possible despite the commission, Otkritie bank said in a
note.

On the stock market, the dollar-denominated RTS index
fell 1.14% to 1,079.99 points. The rouble-based MOEX
Russian index fell 1.6% to 2,592.7 points.

Shares in oil firm Bashneft underperformed the
market, losing 4.5% on the day, while shares in rival Lukoil
were down 1%.

Oil stocks took a hit after the U.S. Congress on Thursday
voted to impose further economic pain on Russia over its actions
in Ukraine, passing a measure to remove its “most favored
nation” trade status and another to ban oil imports, which puts
into law a previous executive order by President Joe Biden.
(Reporting by Reuters; Editing by Kim Coghill, Carmel Crimmins
and Leslie Adler)



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