Ruble rocks up to seven-month high

Central bank says rise in price of oil, better economic indicators hint that risks to price stability are on decline

MOSCOW, RUSSIA: Russia's ruble hit a seven-month high Thursday on the back of rising oil prices, bolstering calls for the central bank to cut its main interest rate at a meeting Friday.

The ruble strengthened to around 63.40 against the dollar -- its best since November and 72.27 to the euro before weakening back slightly.

The recovery comes as the price of oil -- a major source of income for Russia's energy dependant economy -- has nearly doubled since hitting its lowest point in over a decade at the start of the year.

The rise in oil prices and the strengthening of the ruble by about a quarter since January will fuel calls from many in government for the central bank to cut its main interest rate for the first time since last summer to breathe some life into Russia's recession-hit economy.



The bank has cited inflation pressures as it has held the rate steady at 11 percent, but those fears appear to have eased since its last board meeting in April.

"The consensus opinion seems to be skewed towards an interest rate cut," VTB Capital said in a note.

The rise in the price of oil and better economic indicators "hint that (at least in the short term) the risks to price stability are on the decline", the bank said.

"We believe that the CBR (Central Bank of Russia) will cut the key rate 50bp at its 10 June meeting and accompany the decision with a hawkishly worded press release."