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Rouble hits highest since July vs dollar after Russian rate hike

Kitco News

(Updates prices, adds rate decision)

MOSCOW, June 11 (Reuters) - The Russian rouble firmed against the U.S. dollar on Friday to its highest since last July after the central bank raised interest rates by 50 basis points, with higher oil prices adding support.

By 1103 GMT, the rouble was 0.2% stronger against the dollar at 71.63. Minutes after the central bank raised rates and flagged more hikes this year, the rouble hit 71.55, a level last seen on July 27.

Versus the euro, the rouble added 0.4% to 87.00 , its strongest since March 17.

The rate hike was expected by economists after high inflation for May, which prompted a wide-scale revision of forecasts to a 50-basis-point increase, up from 25 basis points previously.

"It is now looking increasingly likely that there will be an additional 50-75bp of hikes, to 6.00-6.25%, by year-end," Capital Economics said.

Central Bank Governor Elvira Nabiullina will shed more light on the bank's plans at a media conference at 1200 GMT.

Higher rates support the rouble by making it more attractive for carry trades in which investors borrow low-yielding currencies, such as the U.S. dollar, and convert them into roubles to buy high-yielding bonds.

The rouble, which took a hit from fears about new Western sanctions against Russia earlier this year, has been on the mend in the past few weeks ahead of a meeting between U.S. President Joe Biden and Russia's Vladimir Putin due on June 16.

This meeting is seen as a sign that more sanctions are not inevitable after the United States barred its banks from buying OFZ government bonds directly from Russia from mid-June.

Brent crude oil, a global benchmark for Russia's main export, was up 0.6% at $72.93 a barrel, heading for a third weekly rise on expectations of a recovery in fuel demand in Europe, China and the United States.

Russian stock indexes were up.

The dollar-denominated RTS index gained 0.9% to 1,691.8. The rouble-based MOEX Russian index was 0.5% higher at 3,846.7 points, earlier touching an all-time high of 3,848.08 points.

For Russian equities guide see

For Russian treasury bonds see

Reporting by Andrey Ostroukh and Alexander Marrow Editing by Angus MacSwan and Mark Potter

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