Rouble rebounds, Russian stocks hit record high ahead of Fed meeting

Credit: REUTERS/MAXIM SHEMETOV

The Russian rouble firmed on Monday on expectations the U.S. Federal Reserve will cut rates this week, while the benchmark MOEX stocks index reached a record high.

Adds rouble gains, analyst comments, updates prices

MOSCOW, Oct 28 (Reuters) - The Russian rouble firmed on Monday on expectations the U.S. Federal Reserve will cut rates this week, while the benchmark MOEX stocks index reached a record high.

After slipping at market opening, the rouble began to rebound, gaining 0.4% against the U.S. dollar to trade at 63.63 RUBUTSTN=MCX at 1030 GMT. If the rouble firms further, to 63.55, that would represent its strongest level since late July.

The Russian currency was up 0.2% against the euro at 70.57 EURRUBTN=MCX.

The rouble is likely to trade within a range of 63.50-64.50 against the dollar this week, said Dmitry Polevoy, chief economist at the Russian Direct Investment Fund.

The Fed meeting, which ends on Wednesday, is expected to cut interest rates 25 basis points. Some analysts expect the U.S. central bank to signal reluctance to cut rates further.

Alexei Antonov of Alor Brokerage said the rouble would receive support this week from the purchase of Russian bonds and expectations of a rate cut by the U.S. Federal Reserve.

Demand for Russian treasury bonds, known as OFZs, was bolstered recently after the Russian central bank cut its key interest rate to 6.5% on Friday and said more cuts were possible.

The rouble was slow to react to the move, but gained strength following the central bank decision.

The rouble is also being buoyed by month-end taxes, which usually prompt export-focused companies to convert their foreign currency to meet local duties. But it will soon lose that support.

"FX-selling due to tax and dividend payments is almost over, while we expect the global backdrop to deteriorate starting on Wednesday due to what we think will be disappointing macro data and a less dovish Fed than the market expects," Sberbank CIB said.

Oil prices were lower on Monday after China released data that reinforced signs its economy is slowing, even though progress in China-U.S. trade talks has supported prices.

Brent crude oil LCOc1, a global benchmark for Russia's main export, was down 0.3% at $61.85 a barrel at 1031 GMT.

Russian stock indexes rose on Monday. The rouble-denominated MOEX index hit a record high of 2,899.65 on Monday morning, before paring gains. The dollar-denominated RTS index .IRTS was up 0.4% to 1,427.5 points.

For Russian equities guide see RU/EQUITY

For Russian treasury bonds see 0#RUTSY=MM

(Reporting by Gabrielle Tétrault-Farber; additional reporting by Andrey Ostroukh; Editing by Larry King and Pravin Char)

((Gabrielle.Tetrault-Farber@thomsonreuters.com;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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