Russia's VTB expects rouble to weaken to 90 vs US dollar by end-2025

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VTB says the central bank has supported the rouble

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Central bank's net forex sales rise despite rouble strength

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Strong rouble has helped fight inflation

By Elena Fabrichnaya

ST PETERSBURG, Russia, July 4 (Reuters) - The Russian rouble will weaken to about 90 against the U.S. dollar by the end of 2025 due to an imminent fall in central bank forex sales, after a strong rally which has helped fight inflation, a top executive at VTB said on Friday.

The Russian currency has rallied by more than 40% year-to-date against the U.S. dollar and traded 0.5% stronger at 78.70 a U.S. dollar by 1230 GMT on Friday, according to LSEG data, based on over-the-counter quotes.

Inflation came in lower in June partly thanks to the stronger rouble, creating room for the central bank to start cutting its key interest rate from the highest level in over 20 years. More cuts are expected this month.

Russia's central bank has supported the rouble with its foreign currency sales, according to Dmitry Pyanov, first deputy CEO of VTB. Pyanov, also VTB's CFO, is the first senior executive to suggest that the rouble's rally was a deliberate policy to fight inflation.

But the rouble will gradually weaken on the back of an expected decrease in the central bank's forex sales later this year as the strong currency is hurting exporters which will put pressure on the regulator, he said.

"I think it (the rouble) is currently at its peak value and will not grow much further," Pyanov told Reuters in an interview. A number of Russian economists, officials and executives have said that the rouble is overvalued.

The central bank, which says it does not target the exchange rate - allowing the rouble to float freely - has attributed the rouble rally to geopolitical factors and weak demand for imports, as firms and households stopped taking loans to buy imported goods.

The central bank will increase its net forex sales by 31% to 9.76 billion roubles ($124 million) a day in July, helping to maintain the rouble at the current level despite calls to let it weaken.

Pyanov challenged this policy, saying that the central bank's floating exchange rate regime worked only in one direction, preventing the rouble from excessive weakening but not from strengthening.

"As the exchange rate begins to weaken, the central bank starts selling (foreign currency). That is why I call it a "floating rouble, but only in one direction," he said, adding that markets should take this one-way float policy into account. (Writing by Gleb Bryanski; Editing by Andrew Osborn and Rachna Uppal)