(Reuters) -The Russian rouble showed little reaction to an unexpected central bank rate cut on Friday, while stock indexes inched lower, weighed down by shares in oil companies which fell after the U.S. congress voted to ban Russian oil.
The central bank cut its key interest rate to 17% from 20% in a surprise move ahead of a regular board meeting scheduled for April 29, and said it held open the prospect of further cuts at upcoming meetings. [L2N2W60I1]
The rouble quickly pared losses after easing slightly following the move, which partially reversed the emergency rate hike that the central bank delivered in late February after Russia had started what it calls “a special military operation” in Ukraine on Feb. 24.
By 0915 GMT, the rouble had eased 0.1% to 75.80 against the dollar, not far away from its strongest level since Feb. 11 of 74.2625 hit on Thursday.
Against the euro, the rouble firmed 0.6% to 81 after briefly touching 80.2225 in early trade, a level last seen in July 2020.
Yields on 10-year OFZ treasury bonds, which move inversely to their prices, fell to 11.41% from 11.62% seen before the rate move.
The surprise decision followed comments by Finance Minister Anton Siluanov who said this week 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 ROUBLE
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 Russia started what it calls its “special military operation” in Ukraine on Feb. 24.
The rouble has recently been steered by mandatory conversion of dollar and euro revenues by export-focused companies, while demand for forex has been limited by capital controls that Russia imposed as the rouble crashed to record lows in March.
Demand for foreign currency is currently hampered by a ban on buying cash dollars and euros as well as by a 12% commission on buying forex online or through a bank.
The rouble will lean towards firming without action from the central bank and could enter the 70-75 range to the dollar during the day, Promsvyazbank analysts said in a note.
But given the latest rouble firming, some recovery in demand for FX is possible even despite the commission, Otkritie bank said in a note.
STOCKS
On the stock market, the dollar-denominated RTS index slid 0.8% to 1,083.4 points. The rouble-based MOEX Russian index fell 1% to 2,609.3 points.
Shares in oil firm Bashneft underperformed the market, losing 4.7% on the day, while shares in its rival Lukoil were down 1.4%.
Oil stocks took a hit after the U.S. Congress voted to impose further economic pain on Russia over its actions in Ukraine, passing one measure to remove its “most favoured nation” trade status and another to ban oil imports.
(Reporting by Reuters; Editing by Kim Coghill)