The ruble strengthened by the Central Bank, but it is temporary
The Bank of Russia for the first time in 2014, raised its key interest rate. Non-residents continue to flee from the Russian market of public debt. The ruble fell slightly against the dollar and the Euro at the opening on Monday.
Last Friday the Bank of Russia for the first time in 2014 went to the tightening of monetary policy. The key rate of the Central Bank was increased by 0.25% to 7.5% per annum. This, at least, suggests that the Central Bank intends to make tough decisions in conditions of instability in the financial market. In itself increase interest rates by a quarter per cent is not able to significantly change the situation, neither the banking sector nor the financial market.
But the signal is very revealing. Besides, Elvira Nabiullina during a press conference said that the Central Bank extends the pause in the purchase of foreign currency for the Ministry of Finance until the end of 2018. In 2019, most likely intervene in the foreign exchange market again resumes.
It is also reported that in August, non-residents sold bonds of Federal loan of 135 billion rubles. Thus, from April to early September from the Russian market, foreigners brought about 480 billion rubles, and their share had fallen to 26.6%.
On this background the dollar exchange rate on the Moscow stock exchange this morning, trading at the level of 68 rubles and 25 kopecks, the Euro is around 79 rubles 40 kopecks. The MICEX index rose to 2,360 points, and quotes of Brent crude oil traded just above $ 78 per barrel. Bitcoins according to CoinMarketCap approaching 6500 dollars.
The decision of the Central Bank about the increase in the key rate was quite expected by many market participants and some significant changes are made in the balance of power in the Russian currency market. The dollar and the Euro had fallen almost the entire past week. We expect that the correction may continue, and we believe that the current rate is still unattractive to buy. But the recommendation to buy at dips to around 65-66 rubles we maintain. And we believe that before the end of this year, it is unlikely that the American currency has a chance to drop to lower value against the ruble.
The head of the analytical Department of the company,