Russian rouble steadies, bonds slightly up on inflation data

Russian rouble steadies, bonds slightly up on inflation data
Russian rouble steadies, bonds slightly up on inflation data
© Reuters. FILE PHOTO: A mock-up of the newly designed Russian 100-rouble banknote is on display during a presentation in Moscow, Russia June 30, 2022. REUTERS/Evgenia Novozhenina

(This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine)

MOSCOW (Reuters) – The Russian rouble steadied and stocks were flat on Thursday, lacking new momentum in summer trade, while bond prices inched higher after inflation data underpinned expectations for another rate cut by the central bank.

At 0759 GMT, the rouble was little changed on the day at 60.77 against the dollar and down 0.2% at 61.78 against the euro.

Propped up by capital controls, the rouble became the world’s best-performing currency this year and is expected to find more support soon from month-end tax payments that usually prompt exporters to convert part of their foreign currency revenues.

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

On the bond market, yields on two-year OFZ treasury bonds, which move inversely with their prices, slid to 8.90% from Wednesday’s close of 9.01% after data showed consumer prices in Russia dipped for the sixth straight week.

“If this trend doesn’t reverse in September, we might see a further rate cut at the CBR’s next meeting,” BCS Global Markets said in a note.

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

Rate cuts boost 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% at 1,135.9 points. The rouble-based MOEX Russian index was 0.1% higher at 2,190.8 points.

“The Russian market is still moving in a sideways trend with no drivers for a trend reversal visible yet,” BCS Global Markets said.

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