Rouble at new 26-month low, stocks extend losses

MOSCOW: The rouble hit a fresh 26-month low against the dollar at Tuesday's opening and shares fell as investors fled riskier assets on deepening uncertainty over banks and debt servicing in the euro zone.

"The Russian market and rouble may test new lows today due to global concerns, as investors grow anxious over a potential Greek default," analysts at Uralsib Capital said in a note.

Euro zone finance ministers said on Monday they were reviewing the size of the private sector's involvement in a second bailout package for Greece, which said its budget gap would be larger than forecast, raising fears about another banking crisis in Europe.

By 0710 GMT, the rouble eased 0.23 percent to 32.67 after hitting its weakest point since mid-August 2009 at 32.75.

"There is demand for foreign currencies but I doubt that it has a speculative nature. I believe that demand is caused by foreign debt redemption," said Stanislav Yarushevichus, chief dealer at ING bank in Moscow.

Russian banks and companies have to pay out nearly $38 billion of foreign debt by the end of the year, central bank data shows.

The central bank is currently also supporting the rouble by selling around $400-600 million daily from its foreign currency reserves.

Versus the euro, the rouble firmed 0.35 percent to 43.15 and it was virtually unchanged at 37.39 against the basket, comprised of 0.55 dollars and 0.45 euros.

On the money market liquidity strains eased after the recent month-end tax payment period, taking overnight lending rates to around 4.5 percent from levels above 5.0 percent.

The dollar-based RTS share index was down 0.8 percent and the rouble-traded MICEX lost nearly one percent, slightly outperforming the broader emerging market index which fell 1.4 percent.

"We recommend staying defensive with a preference for consumer goods, telecoms and (power) generators, along with high dividend-paying stocks," Uralsib said.\

Blue chip energy stocks Gazprom and LUKOIL lost around one percent on the day, while the country's No.1 mobile phone operator MTS rose 0.4 percent.