Rouble pares early losses to strengthen past 93 vs dollar

The rouble reversed early losses to strengthen on Wednesday, heading back towards the three-month high hit in the previous session, supported by the Bank of Russia's tight monetary policy and exporters' forced sale of foreign currency revenues. At 1018 GMT, the rouble was 0.5% stronger against the dollar at 92.94, heading back towards 91.6225, its strongest point since Aug. 1, hit on Tuesday.

The rouble reversed early losses to strengthen on Wednesday, heading back towards the three-month high hit in the previous session, supported by the Bank of Russia's tight monetary policy and exporters' forced sale of foreign currency revenues.

At 1018 GMT, the rouble was 0.5% stronger against the dollar at 92.94, heading back towards 91.6225, its strongest point since Aug. 1, hit on Tuesday. It had gained 0.9% to trade at 98.01 versus the euro and firmed 0.2% against the yuan to 12.66 .

The Bank of Russia hiked interest rates by higher than expected 200 basis points to 15% last week, raising borrowing costs for the fourth meeting running in response to the weak rouble, stubborn inflation and increasing budget spending. "Now a decline in demand for foreign currency from imports is clearly visible due to the fading of consumer demands due to high credit rates," said Alor Broker's Alexei Antonov.

But the rouble rate will be pressurised by the large and constantly growing money supply, Antonov said, expecting any strengthening of the Russian currency to be minimal. The rouble has now lost support from month-end tax payments, which were due on Monday and usually see exporters convert foreign exchange revenues to pay domestic liabilities.

But President Vladimir Putin's decree on mandatory FX sales, which came into force last month, is still buttressing the currency. The decree requires 43 groups of exporters to repatriate 80% of FX revenue and then sell 90% of that sum. The rouble has strengthened from beyond 100 to the dollar since the decree was announced.

Brent crude oil, a global benchmark for Russia's main export, was up 1.2% at $86.05 a barrel. Russian stock indexes were higher.

The dollar-denominated RTS index was up 0.7% at 1,087.7 points. The rouble-based MOEX Russian index was 0.3% higher at 3,209.0 points. The finance ministry was due to hold two OFZ treasury bond auctions on Wednesday.