The US dollar rebounded from a three-week low against the Russian ruble as Federal Reserve officials signaled a rise in interest rates by 2015, while further trimming monetary stimulus, boosting demand for the US currency.
USD/RUB hit a session high at 36.212 at 08:35 GMT, after which consolidation followed at 36.204, adding 0.1% for the day. Support was likely to be received at March 19th low, 35.895, also the pairs weakest since February 28, while resistance was to be encountered at March 19th high, 36.277.
The Federal Reserve revised its forecasts, showing more policy makers predicted the main interest rate, now close to zero, would increase at least to 1% by the end of next year and 2.25% by the end of 2016, higher than previously forecast. The Fed also reduced monthly asset purchases by $10 billion to $55 billion and reiterated it will cut purchases “in further measured steps” at next meetings.
The stance of the central bank was seen as slightly more hawkish than investors expected, boosting demand for the US dollar.
Meanwhile, the Russian ruble advanced to three-week high against the US dollar yesterday, as the US and Europe have been seen to impose limited sanctions against the Russian Federation, including visa restrictions and asset freezes against officials.
On March 18, Russia’s President Vladimir Putin officially signed an accord to start a procedure of the annexation of Ukraine’s breakaway Crimean region. Putin said that his country has no intention to further split Ukraine, but asserted the right to defend Russian speakers in the eastern part of Ukraine.
The Micex Index of shares added as much as 0.4%, after plunging 1.3% yesterday. The index also declined 7.6% last week.
The escalating tension between Russia and Ukraine has deepened the ruble’s decline since the start of the year and the 8.9% plunge of the currency against the US dollar makes it the second-worst performer among emerging markets tracked by Bloomberg after Argentina’s peso.
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