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Russia's rouble sinks after media report says central bank mulls capital controls

MOSCOW: Russia's rouble hit an all-time low against a dollar-euro basket on Tuesday, falling below the level at whic

September 30, 2014

imageMOSCOW: Russia's rouble hit an all-time low against a dollar-euro basket on Tuesday, falling below the level at which the central bank intervenes to defend the currency, after a news report said the bank was considering imposing capital controls.

The central bank, which last intervened to defend the rouble in May, said it was unable to provide immediate comment on the news report. Bank officials have repeatedly said they oppose the imposition of capital controls.

The Finance Ministry also said it was unable to comment.

The rouble briefly plunged to 44.47, below the level of 44.40 where the central bank starts unlimited interventions to defend the currency, before recovering to 44.33 by 1430 GMT.

A forex trader at a large Western bank said the rouble had plunged on a Bloomberg story citing two unnamed Russian officials as saying the central bank was considering imposing temporary capital controls if net capital outflows intensified.

The currency basket "didn't go any higher because there's no official confirmation (of the Bloomberg report)", the trader said.

The rouble fell 0.52 percent against the dollar to 39.64 but was just 0.05 percent weaker at 50.06 against the euro, which sagged after data showing annual euro zone inflation at just 0.3 percent in September.

The rouble has been under heavy selling pressure for months due to falling oil prices, economic sanctions over the Ukraine crisis and strong demand for dollars from Russian firms shut out of international capital markets because of the sanctions.

Analysts said it was unlikely that the central bank would introduce capital controls. Neil Shearing, chief emerging markets economist at Capital Economics in London, described them in a note as "a measure of last resort".

"As things stand, the central bank is more likely to respond to increased outflows by hiking interest rates," Shearing said.

Russian shares were mixed on Tuesday, with no significant impact seen from a decision by European Union officials to leave in place their sanctions against some companies and individuals over the Ukraine crisis.

Some market participants had hoped that some of the sanctions would be withdrawn because of a fragile ceasefire broadly holding in eastern Ukraine.

The dollar-denominated RTS index was down 0.1 percent at 1,124 points at 1430 GMT, while its rouble-based peer MICEX traded 0.4 percent higher at 1,414 points.

Energy companies in general outperformed, with oil company Rosneft up 1.2 percent and gas producer Gazprom up 2 percent. Top bank Sberbank, however, fell 1.2 percent.

Shares in business conglomerate Sistema, which have lost over 60 percent of their value since the company's chairman was placed under house arrest on money-laundering charges two weeks ago, were 2.2 percent higher.

Copyright Reuters, 2014