(Updates prices, adds VTB Capital recommendation)
By Alexander Marrow
MOSCOW, Dec 12 (Reuters) - The Russian rouble strengthened past 63 to the U.S. dollar on Thursday for the first time in five months ahead of an expected fifth key rate cut of the year by the central bank on Friday.
The rouble began the day’s trading marginally stronger after a U.S. Senate committee on Wednesday delayed a vote on imposing new sanctions against Russia over accusations that Moscow meddled in the 2016 U.S. election.
By 1348 GMT the rouble was up 0.4% against the dollar at 63.03, after briefly touching its strongest since July 25 of 62.93. Against the euro, the rouble was 0.4% stronger at 70.15.
VTB Capital, the investment arm of Russia’s second-largest lender, VTB, supported the rouble on Thursday by recommending its clients employ short positions in the dollar against the rouble, predicting a further strengthening of the Russian currency to 61 against the greenback in early 2020.
Other emerging currencies, such as the South African rand and Turkish lira, also firmed against the dollar.
In Russia, investors kept an eye on the central bank which, at Friday’s final central bank rate-setting meeting of 2019, is seen cutting its key rate from 6.5% as consumer inflation has slipped below its target and is on track to fall further.
Former central banker Georgy Luntovsky, now head of the Association of Russian Banks, said this week he believes that the maximum rate cut on Friday would be 25 basis points.
Yields on Russia’s OFZ treasury bonds, which move inversely to their price, added domestic support to the rouble as they fell seven basis points to 6.35%, close to an 11-year low, pricing in the widely expected rate cut.
Russian five-year sovereign credit default swaps, which reflect the cost of hedging Russia-related risks, indicated at about 55 basis points, having started the year at 153 basis points, according to IHS Markit.
Russian stock indexes were up, mirroring moves in oil prices. Brent crude oil, a global benchmark for Russia’s main export, was up 0.5% at $64.0 a barrel.
State-owned gas firm Gazprom was in focus as it announced a new dividend policy, planning to increase its dividend payout to at least 50% of net profit within three years, briefly sending shares to a 10-day high of 254.66.
Later, Gazprom shares gave up some gains and were up 1.2% on the day at 250.27 roubles.
The dollar-denominated RTS index was up 1.9% at 1,490.2 points while the rouble-based MOEX Russian index firmed 0.9% to 2,981.6 points, having earlier threatened to break the 3,000-point mark for just the second time ever.
Shares in Surgutneftegas, Russia’s fourth-biggest oil producer, were up 1.6%.
For Russian equities guide see
For Russian treasury bonds see
Reporting by Alexander Marrow Additional reporting by Sujata Rao in LONDON Editing by Andrey Ostroukh and Nick Macfie