MOSCOW: Russia's rouble weakened on Wednesday, the first full working day in Russia after New Year holidays, as the market priced in risks related to the resumption of state foreign currency purchases due next week.
The central bank is set to resume FX purchases for state reserves from Jan. 15, restoring daily downside pressure on the rouble that eased in late August when the central bank halted FX buying amid increased market volatility.
The rouble, however, was stronger than in late December, gaining more than 3 percent year-to-date thanks to a recent recovery in oil prices and globally higher risk appetite.
At 0740 GMT, the rouble was 0.3 percent weaker against the dollar at 67.09 and had lost 0.5 percent to trade at 76.93 versus the euro.
The Russian currency traded at a distance from its weakest level since March 2016, 71.45 to the dollar, which it touched in thin trade on Jan. 3. It reached its strongest level since Dec. 18 of 66.74 per dollar on Jan. 8.
Oil prices extended gains from late 2018, lending support to Russian assets. Brent crude oil, a global benchmark for Russia's main export, was up 1.07 percent at $59.35 a barrel.
The rouble enjoyed some support in post-New Year trade as non-residents bought the currency along with other emerging- market currencies, but local expectations of the FX buying outweighed that support on Wednesday, said a dealer at a Western bank in Moscow.
Russia's strong current account surplus in the first quarter of 2019 should help mitigate headwinds for the rouble, analysts at VTB said in a note.
"Our short-term dollar/rouble model based on financial market indicators suggests that the rouble stands close to fair levels," analysts at VTB said.
Russian stock indexes were up.
The dollar-denominated RTS index was up 0.3 percent to 1,126.51 points. The rouble-based MOEX Russian index was 0.38 percent higher at 2.398.64 points.
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