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. Last Updated: 07/27/2016

Ruble Hits New High as Trading Band Moved

The ruble scaled fresh 15-month highs on Tuesday, prompting the Central Bank to shift its floating band again and raising the appeal of profit-taking before a possible new upside move.

Against the dollar, the ruble lost 16 kopeks to 29.36 on the MICEX exchange, but was 11 kopeks up against the euro at 39.26, near an earlier 15-month high of 39.22.

Versus the euro-dollar basket, the ruble was down 4 kopeks at 33.81 after hitting 33.71 — its highest since late December 2008, according to Reuters data.

Fueled by strong oil prices, the 10-week-long rally in the ruble became the reason to lock in profits by covering part of short positions in foreign currencies, dealers said.

"There was some profit-taking, the excessive amount of short positions [in dollars and euros] was closed. But I think that the ruble's appreciation trend is still in force," said Sergei Ponomaryov, a dealer at Promsvyazbank.

The ruble's upward trend remains intact because of capital inflows as oil prices hold near recent 18-month highs and thanks to Russian exporters who are expected to start converting part of their revenues into rubles to meet tax payments due next week.

"We saw some support for the basket, some buying from the real sector. But generally, short positions [in foreign currencies] are overwhelming on the market," said another dealer at a bank in Moscow.

Earlier on Tuesday, the Central Bank shifted its floating ruble corridor by another 5 kopeks to 33.70-36.70 rubles after $700 million of purchases amid heavy dollar selling by market players.

Since mid-February the regulator has made 26 such steps.

"The Central Bank intervened at 33.75 and then stepped away," said Mikhail Spolokhov, a dealer at MDM bank.

Interest-rate differentials also favor a ruble that provides attractive yields compared to many other developed and emerging market currencies.

Since last April, the Central Bank has cut interest rates 12 times, bringing them to record lows, but the refinancing rate at 8.25 percent is still higher than in many other countries. Finance Minister Alexei Kudrin said on Tuesday that rising inflation risks meant there may be less room for further rate cuts.

That came in line with expectations that the monetary easing cycle is coming to an end and could help the ruble retain its high-yielding appeal.