June 14, 2019 / 2:37 PM / 2 months ago

UPDATE 1-Russia's rate cut lifts rouble to three-week highs

(Recasts with central bank key rate decision, updates figures)

MOSCOW, June 14 (Reuters) - The Russian rouble reached three-week highs against the U.S. dollar on Friday after the central bank cut its key interest rate to 7.50%.

The rate cut — the first since March 2018 — and chances of further monetary easing mean prices for Russia’s OFZ treasury bonds should rise, making them more attractive. Demand for the bonds, a gauge of market sentiment toward Russian assets, generally support the rouble

“The central bank signalling the possible return to a cycle of monetary policy easing could increase the market’s positive expectations,” said Anton Pokatovich, an analyst at BCS Premier.

“The expected upward movement on the Russian debt market over the summer will, in our view, support the rouble.”

The rouble is also getting support from month-end tax payments beginning on Monday, prompting companies to convert their dollars to meet local duties.

Konstantin Kostrub, head of treasury at ING Eurasia, said that the central bank’s rate cut would only have a limited positive effect on the rouble. Tax payments, he said, could help the Russian currency for the remainder of June.

At 1348 GMT, the rouble gained 0.5% to 64.29 against the dollar, and traded 0.7% higher against the euro at 72.28.

Oil prices, which usually buttress the Russian currency, steadied on Friday but remained on track for a weekly loss. Attacks on two oil tankers in the Gulf of Oman this week gave prices a floor.

Russian stock indexes were down. The dollar-denominated RTS index was down 0.3% to 1,342 points. The rouble-based MOEX Russian index was down 0.6% at 2,741 points.

For Russian equities guide see

For Russian treasury bonds see (Reporting by Gabrielle Tétrault-Farber and Vladimir Abramov; editing by Larry King)

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