On Wednesday, the Russian Rouble remained steady near 90 against the dollar with the help of high oil prices and an upcoming favorable tax period ahead of two OFZ bond auctions by the finance ministry.
Brent crude oil, which is a global benchmark for Russia’s main export, was slightly down at $83.55 a barrel but had hit its strongest point in over three months in the previous session.
The Rouble has been weakening this year as exports fall and imports recover. However, it hit a more than 15-month low in early July following an abortive armed mutiny by the Wagner mercenary group in late June.
Last week, the Bank of Russia’s larger-than-expected 100-basis-point rate hike to 8.5% had a limited immediate impact on the currency, but higher rates should lend the Rouble some support as they make investments in Russian assets more attractive.
Taxes due on July 28, where exporters convert foreign currency revenues to meet local liabilities, could also support the Rouble. Russian stock indexes were down after touching months-long highs.
On the other hand, the Federal Reserve is expected to raise interest rates by a quarter of a percentage point on Wednesday, marking the 11th hike in the US central bank’s past 12 policy meetings and possibly a last move in its aggressive battle to tame inflation.
The increase, anticipated by investors with nearly a 100% probability, would raise the benchmark overnight interest rate to the 5.25%-5.50% range.
There’s little sense that a similar collapse is on the horizon, as the economy is proving more resilient to rising interest rates than expected, with ongoing growth and an unemployment rate that is currently pinned at a low 3.6%.
In assessing where policy may move next, the Fed will be balancing whether the economy remains too strong to return a still-elevated rate of inflation to the central bank’s 2% target against evidence that a process of “disinflation” may be underway that is likely to continue even without any further rate increases.
After a rapid series of rate hikes over the last year, policymakers say they are now making meeting-by-meeting judgments based on incoming data, an approach meant to keep their options open and one likely to be emphasized by Fed Chair Jerome Powell in a press conference.
As the Fed meets this week, policymakers will not provide updated economic and interest rate projections.
However, they will review quarterly bank survey data that has become increasingly important following several regional bank collapses this year.
In June, policymakers projected that the Fed was nearing the end of its hiking cycle, with most only anticipating one more quarter-percentage-point increase beyond the expected hike on Wednesday.
Yet, data since June has dampened expectations for further increases in borrowing costs. Recent headline inflation data was weaker than anticipated, and other indicators of the economy, such as producer prices, suggest that moderation is underway.
On Tuesday, as policymakers began their two-day meeting, the Conference Board reported that U.S. consumers expect inflation to stay low for the next 12 months, reaching the lowest level since November 2020.
USD/RUB Long (Buy)
Enter At: 90.4931
T.P_1: 94.1315
T.P_2: 97.1399
T.P_3: 99.5456
T.P_4: 101.8734
S.L: 83.8287
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