Rouble hits more than 4-1/2-year low vs euro on Nagorno-Karabakh conflict, COVID-19

MOSCOW: The Russian rouble nosedived on Tuesday, hitting 93 against the euro, a more than 4-1/2 year low, continuing its sharp recent downward trend as clashes in Nagorno-Karabakh and rising coronavirus cases at home weighed on Russian assets.

Fighting escalated on Monday between Russia's neighbour Azerbaijan and its ethnic Armenian mountain enclave of Nagorno-Karabakh, and at least 55 people were killed in a second day of heavy clashes, with more casualties reported overnight.

By 0900 GMT, the rouble had lost 1pc to trade at 93.21 versus the euro, reaching levels not seen since January 2016.

It was 0.9pc weaker against the dollar at 79.78, having earlier hit 79.9750 for the first time since March 30.

The main reason for pressure on rouble assets was investors' fears that Russia would be dragged into the conflict in the South Caucasus, said Alor Broker analyst Alexei Antonov.

Azerbaijan's September 2032 and September 2029 dollar-denominated bonds both lost around 3 cents in the dollar, with the former sliding to 96.7 cents, data from Refinitiv showed.

On a country level the conflict could take a hefty economic toll, said Sergey Dergachev, senior portfolio manager at Union Investment, with Armenia already reeling from a decline in remittances and being one of the worst hit countries in the region from the coronavirus outbreak.

For Azerbaijan, the biggest risk is any damage to its pipeline, he said. Oil and gas rich Azerbaijan is particularly vulnerable to any potential energy export disruptions - a major source of its forex revenues.

Azerbaijan's manat currency and Armenia's dram were largely unchanged on Tuesday despite increased tensions.

Rising coronavirus cases at home and abroad hurt Russian assets, with the prospect of new lockdown measures in parts of the world threatening global economic recovery.

On Tuesday, officials in Moscow extended school holidays in October, as health restrictions are gradually reimposed.

Russia's central bank said on Tuesday it would sell an additional 2.9 billion roubles ($36.38 million) a day as part of foreign currency interventions, starting from Oct. 1.

It has been carrying out foreign currency interventions since March.

Rosbank analysts said the increase was insignificant and their structural impact on the forex market would be limited due to their temporary nature.

Brent crude oil, a global benchmark for Russia's main export, was down 0.4pc at $42.06 a barrel. Russian stock indexes fell.

The dollar-denominated RTS index was down 1.3pc to 1,151.5 points.

The rouble-based MOEX Russian index was 0.4pc lower at 2,916.3 points.