Rouble recovers from 5-month low vs dollar; geopolitical fears in focus

  • At 1453 GMT, the rouble was 0.2pc firmer against the dollar at 77.10 after hitting 78.0450, a level last seen on Nov. 5.
Updated 08 Apr, 2021

MOSCOW: The rouble recovered from a five-month low against the dollar in volatile trade on Wednesday amid fears of another escalation of tensions between Moscow and the West.

Geopolitical concerns are growing as Russia started a planned combat readiness inspection of its army while NATO voiced concerns about a Russian military build-up near eastern Ukraine.

At 1453 GMT, the rouble was 0.2pc firmer against the dollar at 77.10 after hitting 78.0450, a level last seen on Nov. 5.

Versus the euro, the rouble was steady on the day at 91.74, having earlier touched 92.7475, its weakest point since early November.

"There is an exodus of non-residents from the rouble as they are really worried about the situation in Ukraine. Local players are more indifferent to the current newsflow," said an FX trader at a major Western bank in Moscow.

The Kremlin said its military movements posed no threat to Ukraine or anyone else after Russia had said a serious escalation in the conflict in Ukraine's Donbass region could "destroy" Ukraine.

"Notwithstanding the remoteness of a 'proxy' escalation in the Ukraine conflict, the larger concern remains that the U.S. will levy more severe sanctions against Russia than prior to the flare up," BCS brokerage said in a note.

The sanction threat has pressured Russian assets for months. Such risks intensified in the second half of March when U.S. President Joe Biden said Russian President Vladimir Putin would "pay a price" for meddling in U.S. elections and cyber-hacking, allegations that Moscow denies.

Despite the sanction risks, the finance ministry saw demand for its OFZ treasury bonds on Wednesday.

OFZ bonds used to be popular among foreign investors and demand for them is seen as a gauge of investors' attitude towards Russia.

The ministry placed 92 billion roubles ($1.19 billion) worth of OFZ bonds, while demand exceeded 120 billion roubles.

The stock market was steered by risk appetite and posted gains even though Brent crude oil, a global benchmark for Russia's main export, fell 0.8pc to $62.26 a barrel.

The dollar-denominated RTS index rose 0.4pc to 1,432.5 points.

The rouble-based MOEX Russian index was 0.4pc higher at 3,507.4 points.

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