MOSCOW: The rouble strengthened to a near two-week high close to 76 against the dollar on Wednesday, but remained sensitive to tensions over Ukraine, with Russia showing no sign of backing down from security demands it has made of the West.
The rouble is moving away from a near 15-month low of 80.4125 versus the greenback hit last week when it was battered by concerns that Russia plans to invade neighbouring Ukraine, something Moscow has repeatedly denied, and Western threats to impose new sanctions on Russia if it makes an incursion.
By 0941 GMT, the rouble was 0.6% stronger against the dollar at 76.32, earlier touching 76.25, its strongest point since Jan. 20. It had gained 0.4% versus the euro at 86.09 , near its strongest in three weeks.
Russian President Vladimir Putin accused the West on Tuesday of deliberately creating a scenario designed to lure it into war and ignoring Russia's security concerns over Ukraine, after Moscow and Washington's top diplomats held talks.
Rouble hits one-week high vs dollar with Ukraine in focus
"On the geopolitical front, the market takes heart from the continuing negotiations, but risk remains," said BCS Global Markets in a note. "Optimism will likely be capped until concrete moves are made."
In a sign that market sentiment was normalising, the finance ministry will resume weekly OFZ government bond auctions this week after cancelling them for the past two weeks amid the rouble crash. The ministry will hold one auction later on Wednesday.
The resumption of OFZ auctions could support the rouble, said Promsvyazbank analysts, who expect the currency to continue firming towards the 76 mark against the greenback on Wednesday.
Expectations of a rate hike by the central bank next week are also positive for the rouble's short-term prospects, said Dmitry Polevoy, head of investment at Locko Invest, anticipating a gradual shift of the rouble into the 75.5-76 range to the dollar.
Analysts polled by Reuters expect the bank to raise its key interest rate by 100 basis points to 9.5% on Feb. 11, to combat stubbornly high inflation.
Brent crude oil, a global benchmark for Russia's main export, was up 0.4% at $89.48 a barrel, hovering near levels last seen in late 2014.
Russian stock indexes were mixed.
The dollar-denominated RTS index was up 0.3% to 1,462.1 points. The rouble-based MOEX Russian index was 0.2% lower at 3,541.9 points, though not far from a more than two-week high of 3,584.71, hit in the previous session.
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