Russian rouble falls on US-China trade dispute, Rosneft shares outperform

MOSCOW: The Russian rouble weakened on Monday as emerging market currencies suffered after an escalation in the trade war between the United States and China, while shares in oil giant Rosneft outperformed following strong results.

At 1405 GMT, the rouble was 0.5% weaker against the dollar at 65.43 and had lost 0.7% to trade at 73.64 versus the euro.

China said on Monday it will adjust tariffs on a revised target list of $60 billion worth of US imports, with additional rates of 20% to 25% in retaliation for a US tariff hike on $200 billion worth of Chinese goods.

"If market mood does not improve visibly, particularly in the absence of progress in talks between the US and China, that can potentially impact the global economy," Sberbank Asset Management said in a note to clients. "We don't expect the rouble to substantially firm towards 64 per dollar."

Scope for further strengthening in the rouble is also limited by the Finance Ministry's plan to increase its daily purchases of foreign currency for state coffers from Tuesday.

The ministry said last week it would purchase 16.7 billion roubles ($255.25 million) in foreign currency a day between May 14 and June 6, up from the 11.6 billion roubles it purchased daily in the previous period.

Last week, the rouble showed more resistance than other emerging market currencies due to what VTB Capital said was high demand for Russian treasury bonds known as OFZs.

Demand for OFZ treasury bonds, which serves as a gauge for global market sentiment for Russian assets, has soared this year after months of fears that Washington would impose sanctions against holdings of Russian foreign debts.

Oil prices, which usually provide momentum to Russian assets rebounded on Monday, with Brent crude up 2.6% to $72.42 a barrel .

Rosneft, Russia's largest oil producer, was in focus as it reported an increase in net profit for the first quarter.

It also reported a rise in hydrocarbon production and said it was ready to further increase its output.

Rosneft shares outperformed, rising 1.9% to 421.9 roubles per share.

The rouble-based MOEX Russian index was down 0.1% to 2,512.2 points, while the dollar-denominated RTS index slipped 0.3% to stand at 1,209.6 points.