MOSCOW: The Russian rouble edged up in afternoon trade in Moscow on Monday as Ukraine said it had begun “hard” talks with Russia on a ceasefire, immediate withdrawal of troops and security guarantees.
After weekend talks Russia and Ukraine gave their most upbeat assessments on diplomatic efforts to resolve their differences, even though Russia attacked a base near the Polish border and fighting raged elsewhere.
At 1340 GMT, the rouble was 1% higher at 113 against the dollar, rising from 116.2 at the market’s opening. It was 1.6% weaker versus the euro at 122.9 after trading at 125.70 in the morning.
Offshore, the rouble was trading as much as 11% stronger against the dollar, but at a similar level to the one in Moscow, around 112. On international markets the rouble has broadly held within a range of 112-133 to the dollar in thin trading since hitting a record high of 150 a week ago. Russia is due to pay $117 million in coupons on two Eurobonds on Wednesday and is prepared to do so in roubles if foreign currency transactions are blocked by western sanctions, the finance ministry said on Monday.
Russia’s invasion of its southern neighbour on Feb. 24 and the economic sanctions imposed by the West in response have roiled financial markets and triggered the worst economic crisis in Russia since the fall of the Soviet Union in 1991.
The central bank has restricted access to foreign currency and the government rolled out initial support measures which helped stabilise the rouble late last week, but the currency is still down almost 30% against the dollar since Russian troops entered Ukraine.
On Monday, the central bank provided banks with 2.1 trillion roubles ($18.3 billion) at a “fine-tuning” one-day repo auction as it continues to beef up banks with liquidity. It will also switch to publishing official exchange rates based on extended trading hours to cover greater number of deals.
Analysts warn the rouble outlook is highly uncertain in an illiquid market.
On Sunday, Ukraine said Russia was “beginning to talk constructively” and that results could be achieved in a matter of days. A Russian delegate said significant progress had been made in talks and the delegations could soon reach draft agreements.
On Monday, Ukraine said it had begun “hard” talks on a ceasefire, immediate withdrawal of troops and security guarantees with Russia, despite the fatal shelling of a residential building in Kyiv.
The Moscow stock market remained largely closed on Monday by order of the central bank, and will remain so for the rest of the week.
On Friday business newspaper Vedomosti reported, citing sources, that the central bank and Moscow Exchange were looking for ways to prevent asset prices collapsing when trading eventually reopens. Stocks last traded in Moscow on Feb. 25, after which the central bank imposed restrictions as volatility spiked.
Evgeny Suvorov, economist at Centro Credit Bank, said that while fighting was ongoing in Ukraine and new sanctions were still being introduced, it was not an ideal time to restart trading. He said Russia’s counter-measures, which are yet to become clear, could be another serious shock for the market.
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