Rouble overcomes sanction fears to recover against dollar

MOSCOW: Russia's rouble recovered from a three-week low against the dollar on Wednesday, but gains were curbed by concern about anti-Russian sanctions and the COVID-19 pandemic.

At 1200 GMT, the rouble was 1% stronger against the dollar at 75.15, up from its weakest level since early December of 75.91, which it touched on Tuesday.

The rouble has been on a recovery path since the US presidential election in early November, but tumbled this week after Washington promised to retaliate over a massive hacking campaign that allegedly involved Russians.

Market sentiment has been soured by fears that the West may impose new sanctions, although Moscow denies any wrongdoing.

After a two-day slide, the rouble could recover to 75 against the dollar thanks to month-end tax payments that are likely to prompt export-focused companies to convert foreign currency to meet the liabilities, Sberbank CIB said.

Against the euro, the rouble was 0.7% stronger at 91.60 , from levels of around 70 seen in early 2020.

In 2021, the rouble is expected to partly recover as the economy will return to growth, a Reuters poll showed.

Yields of Russia's 10-year OFZ treasury bonds, which move in the opposite direction with their prices, jumped to 6.01%, a level last seen in early November.

The finance ministry, however, enjoyed healthy demand of 34.1 billion roubles ($453.88 million) for its OFZ bonds maturing in 2030 at this year's last auction on Wednesday.

"The hack headlines out of nowhere, then hawkish (albeit expected) comments from the CBR, then another round of virus fears... Not a good combo under any circumstances, but more so into the year-end, with liquidity thinner than hopes for a proper gift from Santa," Rosbank said in a note.

Russian stock indexes were mixed, pricing in a recovery in oil prices. Brent crude oil, a global benchmark for Russia's main export, returned above $50 a barrel.

The dollar-denominated RTS index was up 0.3% to 1,355.1. The rouble-based MOEX Russian index was 0.2% lower at 3,230.3, still trading near an all-time high of 3,318.39 hit last week.