Russian ruble saw muted reaction to decision of the Russian Central Bank to hike interest rate by 100 bp to 6.5%. USDRUB ticked lower, hitting resistance near 73.50 mark.
The news from CBR sent USDRUB to 73.52 for the first time since July 6 and EURRUB to 89.49 for the first time since July 1, however bearish pressure eased later in the session.
The Russian banking regulator hiked key rate by 100 basis points at once, in line with most market forecasts due to inflation pressures quickly gaining steam and heightened inflation expectations of households and businesses. This became the most aggressive rate hike in Russia since December 2014.
The foreign exchange market this week largely took into account the likelihood of such a tightening move, which held USDRUB in downward trend since 19 July, so price reaction to the actual outcome was modest.
Among other factors that helped Russian currency to gain foothold are recovering oil prices, sales of foreign-currency earnings by exporters to cover taxes and dividends, easing spat between Germany and the United States around the Nord Stream-2 gas pipeline.
On the funding side of carry trade flows that determine demand for the Russian currency there is a big event next week which is the Fed meeting. The US regulator is widely expected to discount rising inflation pressures in June, focus on employment thus playing down concerns about early policy tightening. This should in turn foster demand for high yielding currencies.