Russian rouble strengthens against the dollar despite interest rate decision

MOSCOW, Dec 23 (Reuters) - The Russian rouble strengthened against the U.S. dollar on Monday as the central bank's decision to keep its key interest rate on hold was outweighed by other factors.

The rouble was up 1.3% at 101.70 against the dollar by 0845 GMT, over-the-counter market data showed. The rouble strengthened 0.8% to 13.85 against China's yuan in trading on the Moscow Stock Exchange.

The Russian central bank kept its key interest rate on hold at 21% on Dec. 20, surprising a market that had expected an increase of two percentage points. The bank said that recent tightening had created conditions for inflation to fall towards its target.

"This came as a surprise and would have previously caused the national currency to fall due to arbitrage. But with carry trade impossible since 2022, other factors currently favour the rouble," said analysts at brokerage BCS.

Analysts said the rouble was supported by the market's gradual adjustment to new U.S. financial sanctions and by the looming corporate tax payment period, ahead of which exporting companies convert foreign currency into roubles.

The rouble fell as much as 15% against the dollar in November after U.S. sanctions hit Russia's third-largest lender, Gazprombank.

Some of the lost ground has been regained since then, with the rouble stabilising above 100 to the dollar. That is now viewed by the market as a new equilibrium level where the currency could remain for some time provided there are no further external shocks.

One-day rouble/dollar futures, which trade on the Moscow Stock Exchange and are a guide for the over-the-counter exchange rate, were down 1.3% at 103.43. The Russian central bank set an official exchange rate at 102.34 to the dollar.

(Reporting by Gleb Bryanski Editing by David Goodman)