RUSSIAN ROUBLE WEAKENS BACK TOWARDS 90 VS DOLLAR

Wed 05 July 2023:

The Russian rouble weakened on Wednesday, heading back towards the 90 mark against the dollar, with demand for foreign currency outweighing supply and as last month’s domestic political turmoil keeps risk appetite low.

At 0718 GMT, the rouble was 0.8% weaker against the dollar at 89.92, after hitting a more than 15-month low of 90.1950 in the previous session.

It had lost 0.9% to trade at 98.08 versus the euro and shed 0.5% against the yuan to 12.39 .

Capital controls have helped insulate the rouble against geopolitics in the 16 months since Russia invaded Ukraine, but mercenary leader Yevgeny Prigozhin’s aborted march toward Moscow on June 24 reverberated through markets and raised questions about President Vladimir Putin’s grip on power.

The rouble lost more than 9% in June and is down around 20% so far this year, making it one of the world’s worst performing currencies.

The rouble will continue to push past 90 in the short term, said Alor Broker in a note, but with the exchange rate now determined by the balance of supply and demand, the rouble could eventually gain from exporting firms.

“Exporters will take advantage of the favourable conditions for them and transfer part of their FX reserves into roubles, including to be able to buy OFZ (bonds) before a key rate increase that looks inevitable,” Alor Broker’s Alexei Antonov said.

Analysts polled by Reuters last week expect the Bank of Russia to raise interest rates in July and again later in the year as inflationary pressure intensifies, and see limited room for the rouble to strengthen in the coming 12 months.

Russia’s finance ministry is due to hold three OFZ treasury bond auctions on Wednesday.

Brent crude oil, a global benchmark for Russia’s main export, was down 0.3% at $76.04 a barrel.

Russian stock indexes were lower.

The dollar-denominated RTS index was down 0.6% at 981.7 points. The rouble-based MOEX Russian index was 0.2% lower at 2,802.0 points.

-Reuters

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