Reuters: US Dollar Report: UPDATE 1-Rouble firms on rate hike, rising oil prices

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UPDATE 1-Rouble firms on rate hike, rising oil prices Sep 13th 2012, 16:16 Thu Sep 13, 2012 12:16pm EDT * Rouble firms after central bank raises rates * Brent crude prices climb above $116.5 * All eyes on the U.S. Fed meeting results * Stocks indexes mixed; Sistema up after Q2 results By Andrey Ostroukh MOSCOW, Sept 13 (Reuters) - The rouble firmed on Thursday, boosted by an unexpected interest rate hike by the central bank and by oil prices which rose on expectations that the U.S. Federal Reserve would announce more monetary stimulus for the world's biggest oil buyer. Russia's central bank raised all of its key interest rates by a quarter point, in a surprise move that reflected its concern about inflation after consumer price growth overshot its 6 percent target. Higher rates are set to boost the rouble's attractiveness by propping up Russia's assets yields and by increasing its appeal for carry trade operations where low-yielding currencies are borrowed to buy into higher yielders. By 1452 GMT, the rouble gained 0.7 percent to 31.30 versus the dollar compared to levels of around 31.42 before the rate decision. Against the euro, the rouble added 0.6 percent to 40.37 and strengthened 0.6 percent to 35.38 versus the euro-dollar basket, propped up by a rise in Brent crude prices above $116.5 per barrel. Although the central bank's decision supported the rouble, it was seen by some analysts as inconsistent at a time of downside risks to economic growth. "While the decision will boost rouble-denominated assets, in particular because it was not expected, it may also invite reasonable questions about whether the central bank has deep understanding about how inflation-targeting operates," Ivan Tchakarov, chief economist at Renaissance Capital, said in a note. "A rate hike will affect lending which will have negative consequences for the stock market, economy," said Anton Struchenevsky, an analyst at Troika Dialog. After Russia's market close investors will be watching the Fed which appears set to launch a third round of unconventional monetary stimulus while signalling that a weak U.S. economy may warrant ultra-low interest rates for at least another three years. "Today the market activity could be the lowest so far this week as no one would take risks before the Fed decision," said Alexei Vorobyov, chief dealer at Vozrozhdenie bank. In the stock market, the rouble-traded MICEX index shed 0.4 percent to 1,472.5 points and its dollar-based peer RTS was up 0.16 percent at 1,484.9, hovering at its strongest since early May. "Stock prices have already priced in a possibility of quantitative easing by the Fed but it's unclear when it will take place, maybe at the end of the year," said Enver Bilyalov, a trader at Prospect investment company. "I prefer to hold to a no-risk positions, keeping 50 percent of funds in cash. If a rally starts it won't be long-lived. I personally don't believe in a strong rally," he said. Shares in Russian holding company Sistema inched up 0.4 percent after the company said it swung to a $161.9 million net loss in the second quarter, hit by a $1.1 billion write-off at its mobile unit MTS, whose license was suspended in the central Asian state of Uzbekistan. Russian Latest Net % Change % Change Markets Change year-to-date STOCKS MICEX 1472.60 -5.94 -0.40 5.02 RTS 1484.88 2.37 0.16 7.45 London ADRs 864.84 2.09 0.24 11.10 Emrg Mkt Indx 977.55 -0.93 -0.10 6.67 MSCI Russia 805.91 1.50 0.19 9.39 Sberbank 92.75 -0.83 -0.89 17.61 VTB 0.06 -0.00 -0.95 -3.60 Gazprom 162.99 -0.22 -0.13 -4.85 LUKOIL 1938.00 -7.00 -0.36 13.83 Rostelecom 126.49 -0.61 -0.48 -16.78 Dollar/Rouble 31.30 -0.21 -0.67 -2.64 Euro/Rouble 40.37 -0.23 -0.57 -3.28 Rouble basket 35.38 -0.22 -0.62 -2.97 DEBT Bid Ask %Rtn Coupon Russia 10-yr bond 7.79 7.77 0.06 7.60 MONEY MARKET Bid Ask Close Overnight rate 5.10 5.60 4.84 All data taken from Reuters at 1452 GMT Link this Share this Digg this Email Reprints

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