MOSCOW: Russia's stock markets inched down early on Wednesday, tracking a bearish global mood after a meeting of the US Federal Reserve, while the rouble fell on the back of a sell-off in currencies from leading commodity producers.
By 0740 GMT, the rouble eased 0.55 percent to 31.76 versus the dollar , its weakest since Oct. 10, while it rallied 0.8 percent to a two-week high against the euro at 41.40.
Still, conditions on commodity markets remain broadly favourable, and losses for the rouble should be contained by export-focused companies who use nominally high dollar rates to sell the greenback, placing roubles on deposit with banks while they wait to make tax payments in the local currency.
"Oil is expensive, the euro/dollar rate is low, so exporters have a stimulus to convert foreign currencies before tax payments. The central bank is also selling (dollars and euros)," said Pyotr Neymishev, chief dealer at Otkritie bank, referring to factors that limit the rouble's downside.
Against the euro-dollar basket, the rouble had added 0.1 percent to 36.09 , remaining in the range of 35.70-37.70 where the central bank sells a few hundred million dollars a day to ease downside pressure on the rouble.
"Worrying signs come from the money market which could result in trimming of long positions in foreign currencies," said Neymishev.
Interbank overnight offered rates stood at 5.2 percent after hitting 5.75 percent earlier this week, their highest since the start of 2010, pointing at tight liquidity in Russia's banking system.
The central bank's monthly interest rate meeting will be in focus on Dec. 23 with some analysts now saying the bank will ease monetary policy to help the market overcome liquidity shortages.
"Once political uncertainty dissipates, the central bank may cut policy rates," analysts at Renaissance Capital said in a note.
Political risks in Russia have increased after a parliamentary election on Dec. 4 prompted tens of thousands of people onto the streets, calling for a vote recount and blaming the ruling United Russia party for rigging vote results.
Local factors, however, were eclipsed by the Fed which warned that turmoil in Europe presents a big risk to the US economy, falling short of some speculation it could inject more liquidity into the system.
"The Fed failed to meet investors' expectation. And a growth on the Russian market is not foreseen yet as the market is pricing in a possibility of rating downgrade in France and in other countries," said Alexander Zalko, head of sales at Finam brokerage.
The dollar-based RTS index fell 0.5 percent and the more liquid rouble-traded MICEX inched down 0.16 percent.
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