Russian rouble retreats

The Russian rouble retreated on Tuesday as the US dollar surged on global markets, oil prices slid, and the need for roubles to pay monthly taxes waned. At 1450 GMT, the rouble was 1.2 percent weaker against the dollar at 50.58 and down 0.4 percent to 54.82 versus the euro. The rouble's weakness "is largely the result of the situation on the global forex market. Expectations of an increase in the US Fed's rates have provoked a firming of the dollar on all fronts," TeleTrade analyst Alexander Egorov said in a note.
The dollar was 1.2 percent stronger against a basket of major currencies on Tuesday, benefiting from comments on Friday by Federal Reserve Chair Janet Yellen that "it will be appropriate" to raise rates this year if the US economy continues to improve. The stronger dollar also pressured Brent crude oil, an important driver for Russian assets, which was trading 2.2 percent lower at just over $64 per barrel. Analysts said less need by companies to raise local currency to pay monthly taxes was also working against the rouble.
The last large monthly tax, profit tax, falls due on Thursday, but the peak of payments has passed following Monday's deadline for mineral extraction tax. The central bank on Tuesday kept the limit at its one-week forex repo auction at $100 million for the third week in a row. It has slashed the limit on the instrument from as much as $3 billion in early April, the latest winding down of measures introduced late last year to support the rouble.
"One shouldn't forget the actions of the central bank, which are putting additional pressure on the currency market," BCS analyst Ivan Kopeikin said in a note. He referred to the bank's daily forex purchases, cuts in its key rouble lending rate, and tighter conditions for repo loans in foreign currency. The rouble is up around 11 percent against the dollar this year. It rose partly as demand for foreign currency eased after foreign debt repayments by Russian companies and banks peaked in the first half of the year. However, analysts at VTB Capital emphasised that debt repayments in June will be around double the level in May. The rouble may also come under pressure next month because of upcoming dividend payments to foreign shareholders.