MOSCOW: The Russian rouble plunged over 5 percent on Friday ad a recent rally ran out of steam and markets digested the probability that the central bank will soon cut its main lending rate again.
At 1500 GMT, the rouble was 5.1 percent weaker against the dollar at 52.44 and had lost 5.2 percent to 56.48 versus the euro.
Friday's sell-off followed a strong rebound in the rouble this month, which had pushed the dollar's value below 50 roubles for the first time since late November.
Even after the sell-off, the rouble remains up around 10 percent against the dollar this month, and up a third since hitting a 2015 low at the end of January.
However, several analysts had warned that the rouble's value was becoming stretched, not least because the central bank is expected to keep cutting its key lending rate, now at 14 percent, when it next meets to discuss rates on April 30.
Central Bank Governor Elvira Nabiullina lent weight to those expectations on Thursday when she said that the rouble had found its equilibrium and its appreciation gave the bank grounds for further rate cuts.
"The rouble appreciation, all else being equal - if there will be no new significant negative factors - will allow us to lower our key interest rate," Nabiullina said. Her comments were interpreted by market players as a signal that the bank thinks the rouble has rebounded enough for now.
"The Bank of Russia has given to understand that the fall in the dollar below 50 was excessive.
Now this level will act as a lower boundary of the trading range," said Alfa Bank trader Igor Akinshin, who put the upper boundary at 54 roubles per dollar.
Analysts at Sberbank CIB said that another reason the rouble was correcting downwards was that recent heavy demand for roubles from the general public has now subsided, with demand for foreign currency expected to rise as May holidays approach.
The picture is complicated by impending tax payments by Russian exporters that typically support the currency towards the end of each month as they require forex to be converted into roubles.
Rouble sell-offs have also become common towards the end of the week as profits are fixed. The rouble also tumbled sharply last Friday after the central bank raised the rates it charges on dollar repo loans to banks - only to rebound again at the beginning of this week.
The Russian currency's recent gyrations have further underscored the present disconnect between the rouble and oil prices, which are typically its key driver.
Brent was up 0.3 percent on Friday to $64.2 per barrel. It has rallied strongly this week above $60 per barrel, setting a 2015 high of $64.95 per barrel earlier on Friday.
"The rally in the Russian currency has fizzled out, although oil prices are at very attractive levels," Zenit Bank analysts said in a note.
The plunging Russian currency also weighed on stock indexes, with the biggest fall in the dollar-based RTS index that is closely linked to the rouble.
At 1500 GMT, the RTS was down 5.2 percent to 1,006 points, with the rouble-based MICEX index falling 0.6 percent to 1,677 points.
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