The ruble is getting cheaper against the dollar on Friday morning, together with its peer currencies, reacting to the negative expectations of the Fed rate hike for risky assets; at the same time, it is getting more expensive against the euro, looking back at the dynamics of the main currency pair.

At the same time, activity and liquidity may be lowered in anticipation of the results of today’s CBR Board of Directors – local market participants are waiting for the tightening of the Russian regulator’s policy and clarification of the situation with currency interventions, suspended since January 24.

As expected, the Central Bank today (13.30 MSC) will raise the key rate by one percentage point to 9.5% per annum, and will maintain a tough rhetoric in the context of high Russian inflation and persistent geopolitical risks.

At the same time, expectations have increased in the external markets that the Federal Reserve may start the cycle of normalization of the MPC in March by raising the dollar rate by half a percentage point after yesterday’s data on U.S. inflation, which reflected the largest annual increase in consumer prices over the past 40 years.

Quotes of dollar/ruble pair with “tomorrow” by 10.10 MSC were at the level of 75.18, and the ruble is slightly cheaper from Thursday’s stock exchange closing, by the end of which the Russian currency lost more than a third of a percent, but intraday managed to mark at the maximum since January 3, 74.26.

The ruble paired with the dollar looks better than its peers – on its side is the high current nominal ruble exchange rate of the U.S. currency, attractive for exporters.

The euro/ruble pair was at 85.34 by 10.10 MSC, here the ruble is appreciating by 0.7%. On Thursday, however, it lost three quarters of a percent against the euro, but during trading showed positive dynamics and reached the maximum since January 12, 84.77.

“We should not expect strong support for the ruble from the external background, as well as today’s meeting of the CBR: the increase in the key rate by 100 bp is already laid by the market”, – said Egor Zhilnikov from Promsvyazbank.

In his opinion, the dollar/ruble pair will end Friday’s trading closer to the upper boundary of the range of 75-76 rubles per dollar.

In favor of the ruble this week were hopes for de-escalation, multi-year highs of oil, providing an increased inflow of export earnings, not compensated by the CBR interventions, as well as expectations of growth of the CBR key rate.

On the contrary, the demand for the currency, which has fallen significantly in price over the last few days, as well as the risks of increasing the cost of funding for carry-trade operations due to expectations of rate hikes by the U.S. and European regulators, played against it the day before.

At night, the geopolitical background also worsened: the U.S. State Department urged Americans in Ukraine to leave the country immediately due to “increased threats of Russian military action” against the neighboring country, while the negotiations of political councilors in the Normandy format on the settlement of the crisis in Ukraine ended without tangible results.

The West threatens Moscow with sanctions if it invades Ukraine, while the Russian authorities deny any intention to go to war with the neighboring country, but at the same time keep a large troop group on the southwestern border and conduct large-scale exercises in Belarus together with the Belarusian army.

Meanwhile, the U.S. dollar is gaining almost half a percent against the euro ($1.1375), growing by a quarter of a percent against the 6-currency basket (96.02), appreciating with varying degrees of intensity against commodity and emerging currencies.

The dollar’s rise was spurred not only by high U.S. inflation, but also by a fresh comment from the Fed’s top official, the head of the Federal Reserve Bank of St. Louis, who said he would like to see the dollar rate raised by one percentage point as early as July.

At the same time, forex began to put into quotes and risks of rate hikes by other major central banks, in particular, the European Central Bank, which on the previous day smeared the dollar’s reaction to high US inflation, but today it is gaining on the previous day.