Adds Goldman Sachs note, bond auction result, updates prices
MOSCOW, Oct 23 (Reuters) - The Russian rouble weakened on Wednesday, hurt by growing risk aversion amid a U.S.-China trade conflict and Britain's exit from the European Union, ignoring potential gains from government bond auctions.
The rouble was 0.3% weaker against the dollar on the day at 63.92RUBUTSTN=MCX, falling from Tuesday's 12-week high of 63.56, and had lost 0.3% to trade at 71.20 versus the euro EURRUBTN=MCX.
Wednesday's auction of rouble-denominated OFZ bonds by the finance ministry saw strong demand of 79.6 billion roubles ($1.25 billion) for its 11-year bond.
The demand offered little help to the rouble, however, before Friday's interest rate decision, when the central bank has signalled it will cut its key rate from 7.0%.
The prospect of a rate cut fuelled demand for Russia's sovereign debt before the central bank's actual move later this week. Yields on 10-year OFZ treasury bonds, which move inversely to the price, dipped to 6.45% on Wednesday, their lowest since May 2013. RU10YT=RR
But lower rates reduce make the rouble less attractive for carry-trade speculation, where traders exploit the difference in interest rates compared with other currencies for cheap funding.
Analysts polled by Reuters on average forecast a 25-basis-point cut this Friday . Some are braced for a cut to 6.5%.
Russia's largest and second-largest lenders, Sberbank and VTB Bank, along with Goldman Sachs, believe a 50-basis-point cut is on the cards.
"In light of recent statements by the Central Bank of Russia's leadership and the persistent weakness of inflation, we forecast a 50-basis-point cut on Friday and at the following meeting in December, superseding our previous forecast of four 25-basis-point cuts in the next meetings," Goldman Sachs said in a note.
"I think we can expect a reduction in the key rate," said VTB Bank CEO Andrey Kostin. "I know Sberbank is forecasting it will be 6% before the end of the year. I think this is quite realistic."
Brent crude oil LCOc1, a global benchmark for Russia's main export, was down 0.8% at $59.2 a barrel.
Russian stock indexes were down on the day. The dollar-denominated RTS index .IRTS was down 0.5% to 1,380.5 points. The rouble-based MOEX Russian index .IMOEX was steady at 2,801.0 points.
For Russian equities guide see RU/EQUITY
For Russian treasury bonds see 0#RUTSY=MM
($1 = 63.9110 roubles)
(Reporting by Alexander Marrow; additional reporting by Andrey Ostroukh; editing by Larry King)
((email@example.com; +7 495 775 1242;))