Rouble firms as Biden-Putin talks soothe nerves

9:44 am Wednesday, December 08th, 2021

MOSCOW (Reuters) – The Russian rouble firmed past 74 to the dollar on Wednesday, supported by the central bank’s intention to raise rates and an increase in market risk appetite after a much-anticipated video call between Russian and U.S. leaders.

U.S. President Joe Biden warned Russian President Vladimir Putin on Tuesday that the West would impose “strong economic and other measures” on Russia if it invades Ukraine, while Putin demanded guarantees that NATO would not expand farther eastward.

Even though the conversation did not lead to any solid progress on Ukraine, it could restore some status quo and ease pressures on the market, said Artem Zaigrin, chief economist at Sova Capital.

At 1310 GMT, the rouble was 0.5% stronger against the dollar at 73.70 , but hovered far off its 2021 peak of 69.21 hit in October. The Russian currency eased 0.1% against the euro to 83.30.

Government bonds regained some ground after the Biden-Putin call, which despite not reporting any breakthroughs led to the two leaders agreeing to continue communication, which could lower global tensions.

“There are, of course, grounds to find immediate optimism as the U.S.-Russia summit took place yesterday with no signs of outright confrontation and the Russia-targeted measures didn’t make it into the final text of the U.S. defence bill 2022,” analysts at Rosbank said in a note.

The rouble is also poised to get support from the central bank, which is expected to raise the key interest rate by more than 25 basis points at its Dec. 17 meeting in response to stubbornly high inflation.

Russia will report its inflation data for November and the latest week later on Wednesday.

Year-end inflation is likely to exceed the central bank’s forecast up to 7.9%, which could prompt a rate hike of more than 50 basis points this month and another rate increase might follow, according to Dmitry Kharlampiev at the debt market department of Sinara investment bank.

Stock indexes gave up earlier gains and decline, with the dollar-denominated RTS index falling 0.5% to 1,639.9. The rouble-based MOEX index fell 0.9% to 3,837.9.

(Reporting by Andrey Ostroukh; Editing by Rashmi Aich and Mark Heinrich)