MOSCOW: The rouble slid on Wednesday, dragged down by the strengthening dollar, falling oil prices and continuing uncertainty over the European Union's new sanctions package against Russia.
At 1430 GMT the rouble was down 0.65 percent against the dollar to 37.34 and down 0.49 percent to 48.28 versus the euro, leaving the rouble down 0.55 percent at 42.27 against the dollar-euro basket.
Moves in Russian stock indexes largely reflected the weaker rouble, with the dollar-denominated RTS index dropping by 0.7 percent to 1,238 points, while the rouble-based MICEX was flat at 1,468 points.
The rouble has been falling along with other emerging market currencies as investors anticipate U.S. Federal Reserve rate rises and as the price of oil weakens.
But in Russia these strains are compounded by the Ukraine crisis, with several major Russian banks and companies cut off from dollar financing by western sanctions.
"All emerging markets are under pressure and oil is falling," said a currency dealer at a large western bank in Moscow. "There is global demand for the dollar, and for us the need is strengthening for repaying foreign currency loans in conditions of limited access to western resources."
Adding to the pressure on Russian financial markets is continuing uncertainty about further western sanctions.
The European Union formally approved new sanctions on Monday to punish Moscow for its policies in Ukraine, but it has delayed implementing them to assess the ceasefire.
Ambiguous comments by EU officials have created doubts over whether the union still intends to introduce the new wave of sanctions, which would restrict lending to major Russian oil companies and technology exports to Russia.
However, German Chancellor Angela Merkel said on Wednesday that the EU should go ahead with the sanctions, adding that they could always be suspended at a later date if there was substantial progress towards a peace plan for Ukraine.
Separately the U.S. State Department said on Tuesday that the U.S. is finalising a new package of sanctions against Russia.
"News that the EU is delaying the introduction of sanctions had an extremely modest impact on trades on the Moscow exchange," Veles Capital analyst Airat Khalikov said in a note. "Possibly the reason is the fact that many analysts think that the ceasefire has only a temporary character."
Nevertheless the ceasefire continued to hold on Wednesday.
Russian President Vladimir Putin and his Ukrainian counterpart Petro Poroshenko spoke by phone on Tuesday evening - the second conversation in two days - with Putin reiterating his commitment to "further assist" the peace process.
"The continuation of the negotiating process - this is a positive signal for all sides, including participants of the stock market," commented Investcafe analyst Mikhail Kuzmin.
"The results of the telephone conversation between the Presidents of Russia and Ukraine confirm that at this level the intention remains to maintain the achieved agreements," commented ING economist Dmitry Polevoy.
"The longer this situation continues, the less speculators will want to hold short positions against the rouble."
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