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© Reuters. This illustration was taken on May 30, 2022. REUTERS/Dado Ruvic/Illustration

(Reuters) – The Russian rouble strengthened on Friday. It climbed back to a record high of more than 2 weeks, thanks to capital controls. This was as the market waited for a rate cut from the central bank.

At 0724 GMT the rouble had gained 1.1% against the dollar, at 58.71. This was not too far from the Thursday high of 57.407575 which was the highest since May 25.

It traded at 61.96 against the euro after a gain of 2.1%, which was close to its two-week peak.

Expectations are that the central bank will reduce interest rates. This could put downward pressure on the ruble and support OFZ Treasury bonds.

Reuters polled a majority of analysts and they expect a rate reduction to 10% by the bank to lower lending costs.

Rate decisions are due by 1030 GMT. Following that, a briefing will take place with Governor Elvira Nubullina at 1200 GMT.

Alexander Dzhioev from Alfa Capital said that it is unlikely the decision of the central bank will affect the rouble rates given current restrictions on capital flows.

“But it is important to note that the currency may stop strengthening if combined with other factors like, for instance, abolishing compulsory foreign earnings sales by companies exporting.

The decree signed by President Vladimir Putin on Thursday was intended to allow export-oriented companies to lower their conversions of foreign currencies.

Exporters were forced to convert 80% in their revenue into roubles due to capital controls. This was after Russia deployed tens and thousands of troops into Ukraine on February 24. Later, this ratio was reduced to half-off in May.

Russian stock indexes varied.

Dollar-denominated RTS was at 1,226.7 point, an increase of 1.1%. 2.285.9 points was lower than the MOEX Russian, which is based on roubles.

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