Russian rouble slumps on renewed sanctions risk, weak oil prices

MOSCOW: The rouble weakened on Monday, dragged down by weak oil prices and as investors weighed the risk of new sanctions against Moscow after Kremlin critic Alexei Navalny was detained on his return to Russia.

Western nations were quick to call for Navalny's release after police detained him on Sunday after he flew home from Germany for the first time since he was poisoned last summer, pressuring Russian assets.

By 1031 GMT, the rouble was 0.9% weaker against the dollar at 74.28, slipping to a near one-week low.

It had lost 0.8% to trade at 89.59 versus the euro . Brent crude oil, a global benchmark for Russia's main export, was down 0.2% at $55.01 a barrel.

"An additional negative for the rouble could be the authorities' decision to arrest Alexei Navalny, who returned to Russia yesterday, as for many investors it will be a reminder of the sanctions threat," said Dmitry Polevoy, head of investment at Locko-Invest.

Joe Biden's ascendancy to the US presidency later this week also carries higher geopolitical risk for Russia, said BCS Global Markets in a note.

A spike in global coronavirus cases further limited risk appetite, adding to the rouble's woes. Russia reported almost 23,000 new COVID-19 cases on Monday.

The rouble did receive some support from a month-end tax period that usually sees export-focused companies convert their foreign currency revenues into roubles to meet local liabilities.

Citing the increase in Russia's inflation expectations and the central bank's track record of being cautious with the key rate cuts, JP Morgan removed a final 25-basis-point cut from its forecast. The key rate currently stands at 4.25%.

The next rate-setting meeting is scheduled for Feb. 12.

Russian stock indexes were lower.

The dollar-denominated RTS index was down 0.6% at 1,465.4 points. The rouble-based MOEX Russian index was up 0.1% at 3,455.7 points.

Shares in conglomerate Sistema were up 0.1% after the company said it was preparing its forestry business Segezha Group for a potential IPO this year.