LONDON: Russia's rouble strengthened on Tuesday, reversing some of the previous day's losses in thin volume with traders pointing to central bank interventions, while Greece's political upheavals depressed broader emerging market assets.
The rouble rose more than 3 percent against the dollar. The Russian central bank said the finance ministry sold $80 million on Dec. 26 to defend the currency.
The central bank releases its interventions data with a time lag and said it did not intervene on Dec. 26.
"We believe the worst is past but the lack of visibility will keep the U.S. dollar-rouble trading extremely complicated," analysts at RBC Capital Markets said in a note, adding that higher real interest rates and stabilising oil prices should shore up the Russian currency in 2015.
The rouble is down about 40 percent against the dollar this year, hurt by falling oil prices and Western sanctions over Ukraine that have limited Russian firms' ability to borrow abroad and spurred demand for dollars.
With oil falling again on Tuesday, there was little respite for Russian assets and Moscow shares fell hard. The dollar-denominated RTS index traded more than 3 percent lower.
In the Middle East, weak oil also blew a chill wind through markets. Saudi stocks fell 3.5 percent and Dubai dropped more than 4 percent.
More broadly, the MSCI emerging stocks index fell 0.5 percent after a weak trading session in Asia. Political uncertainty in Greece after the prime minister failed to gather enough support for his presidential nominee, triggering a snap election in January, soured the mood.
Investors worry the anti-austerity Syrzia party could come to power in Athens. It has said it would walk away from the terms of an international bailout agreed during the euro zone crisis with the European Union and International Monetary Fund.
A stronger dollar pressured other emerging currencies, with the Turkish lira and South African rand both weaker.
With a broad acceptance that the U.S. Federal Reserve will end the era of ultra-loose monetary policy during 2015, investment has flooded to U.S. assets. This has depressed emerging market assets that had attracted money because they offered the prospects of higher returns.
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