Rouble rebounds past 78 vs dollar from weakest levels since March

MOSCOW: The Russian rouble firmed in volatile trade on Wednesday, bouncing off recent lows amid successful government bond auctions, but its gains were capped by increased risk aversion.

Geopolitical risks, including the prospect of more sanctions against Moscow, have plagued the rouble in the past few weeks due to the political turmoil in neighbouring Belarus, the suspected poisoning of Kremlin critic Alexei Navalny and the military conflict in the South Caucasus.

The rouble crashed to its weakest level since late March of 79.9750 versus the dollar this week but by 1400 GMT on Wednesday it was up 1.7pc on the day at 77.78 against the greenback.

"An important point is that the recent rouble weakness is not a response to a deterioration in fundamentals but a reflection of growing geopolitical risk," Alfa Bank said.

Geopolitical risk premium in the rouble is now near its highest since 2018, said Artem Zaigrin, chief economist at Sova Capital.

"Current market levels suggest a "fair" rouble-dollar rate of 72.5, which we think is possible by the end of the year or in the first quarter of 2021," Zaigrin said.

Rising coronavirus cases at home also weighed despite Russia saying it has completed clinical trials of a second potential vaccine against COVID-19.

The rouble, which lost around 20pc of its value against the dollar so far this year, may obtain support from state-run companies that have been told to revise the limit of net foreign exchange assets, Interfax news agency reported late on Tuesday.

Against the euro, the rouble gained 2pc to 91.00, still trading near its weakest level since early 2016 of 93.32 it hit on Tuesday.

The finance ministry was in focus as tested market appetite for its OFZ treasury bonds, popular among foreign investors.

The ministry sold 175 billion roubles ($2.25 billion) worth of OFZs to demand of 229 billion roubles.

Brent crude oil, a global benchmark for Russia's main export, was down 0.3pc at $40.78 a barrel, extending losses as rising coronavirus cases prompted global concerns about restrictions on activity that could curb fuel demand.

On the stock market, Russia's top shipping company Sovcomflot was in the spotlight as it announced a plan to sell an up to 17pc stake in new shares in Moscow and raise around $534 million amid globally suppressed risk appetite.

The dollar-denominated RTS index was up 2.2pc to 1,180.5 points.

The rouble-based MOEX Russian index was 0.1pc higher at 2,912.9 points.