June 18, 2019 / 1:40 PM / 4 months ago

UPDATE 2-Russian rouble at near two-month high, bonds in focus

(Updates with rouble gains, quotes)

MOSCOW, June 18 (Reuters) - The Russian rouble hit a near two-month high on Tuesday after the finance ministry announced treasury bond auctions that often bolster the national currency.

The rouble firmed 0.6% on the day against the U.S. dollar to touch 63.91 for the first time since April 24, and was 0.8% stronger at 71.61 versus the euro.

The rouble’s move comes after the finance ministry said it would auction two series of OFZ treasury bonds on Wednesday, setting the overall amount on offer at 25.3 billion roubles ($395 million).

Demand for OFZ treasury bonds buttressed the Russian currency in recent months.

“Quantitative easing by the European Central Bank and the prospect of the U.S. Fed cutting rates will prompt Western demand for emerging market assets, including for OFZ bonds,” said a trader at a major Russian bank.

Demand for the bonds, which were not auctioned last week because of a public holiday, serve as a gauge of global market interest in Russian assets. Yields of Russia’s benchmark 10-year OFZ bonds dropped to 7.59% on Tuesday, their lowest since July 2018, moving inversely with their prices.

The U.S. Federal Reserve begins a two-day policy meeting on Tuesday and is expected to lay the groundwork for a rate cut later this year. This would probably increase demand for emerging market currencies as investors look for higher-yielding assets.

The head of the European Central Bank on Tuesday also raised the possibility of new rate cuts or asset purchases if euro zone inflation does not head back to its target.

The Russian central bank last week cut its key interest rate for the first time since March 2018, signalling it could pursue a monetary easing policy to tackle slowing economic activity.

Russian stock indexes were up.

The dollar-denominated RTS index was up 1% at 1,353 points, while the rouble-based MOEX Russian index was up 0.5% at 2,748 points.

For Russian equities guide see

For Russian treasury bonds see (Reporting by Gabrielle Tétrault-Farber and Vladimir Abramov; Editing by Andrey Ostroukh and Susan Fenton)

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