Alexander Marrow, Andrey Obrovukh

MOSCOW, (Reuters) – The Russian rouble fell below 74 against the dollar on Wednesday as investors turned their attention to central bank meetings, such as the U.S. Federal Reserve or the Bank of Russia.

At 74.33 GMT on 1722 GMT the rouble had lost 0.7% against the dollar, making it its lowest level since Dec. 7. The rouble had fallen 0.7% and traded at 83.67 against the euro.

As investors focused on the pivotal U.S. Fed meeting, which was expected to reinforce market expectations of earlier and more aggressive interest rate increases next year, the dollar held onto its gains.

Russian assets are under increasing pressure due to rising East-West tensions. In the last weeks, both Washington and Western capitals voiced concerns about Russian troops near Ukraine.

According to Dmitry Polevoy of Locko Invest, the head of investment, “Geopolitical Noise” still affects the rouble. However, it may strengthen towards 72-73 versus USD in the short term because month-end taxes prompt companies that are export-focused to convert FX revenue to cover local liabilities.

As inflation nears its peak since 2016, the central bank could support the rouble by raising interest rates Friday by 100 basis points.

VTB Capital Investment stated in a note that the high real rate and low commodity prices would support the ruble in 2022. VTB Capital Investment revised its 2022 dollar-rouble forecast to 68 instead of 70. The reason was tighter central banks monetary policy, higher oil prices and tighter central bank monetary policy.

Russian stock indexes are mixed.

At 1,541.0 points, the dollar-denominated RTS fell 0.5%. Although the MOEX, which is based on roubles, was 0.1% higher at 3,621.8 points, it still remains close to its lowest level since April (3532.29), when it touched Tuesday.

Sinara bank analysts wrote in a note, “Russian stocks appear to be now oversold, considering their solid fundamentals and we see upside even if there is a bear scenario pandemic.”

($1 = 73.9110 roubles)