Russian rouble firms past 78 vs dollar, stocks reverse losses

Trading activity remains subdued compared to levels seen before Feb. 24, while movements in the rouble are artificially limited by capital controls imposed in late February. On Tuesday, the central bank slightly relaxed capital controls for export-focused companies outside the commodities and energy sectors, extending the deadline by which they need to convert foreign currency to roubles to 60 days from three days.

The Russian rouble firmed past 78 to the dollar in volatile trade on Wednesday, while stock indexes reversed earlier losses as the market watched developments around Ukraine and sanctions against Russia.

The country's economy faces soaring inflation and capital flight while grappling with a possible debt default after the West imposed harsh sanctions against Moscow for sending tens of thousands of troops into Ukraine on Feb. 24. By 1147 GMT, the rouble had gained 1.6% to 77.25 to the dollar, hovering near levels seen before Feb. 24. It briefly hit 71.8850 to the dollar on the Moscow Exchange.

Against the euro, the rouble added 1% to 83.27 , heading away from an all-time low of 132.41 hit on the Moscow Exchange on March 10. Trading activity remains subdued compared to levels seen before Feb. 24, while movements in the rouble are artificially limited by capital controls imposed in late February.

On Tuesday, the central bank slightly relaxed capital controls for export-focused companies outside the commodities and energy sectors, extending the deadline by which they need to convert foreign currency to roubles to 60 days from three days. Last year, non-commodity and non-energy exports from Russia totalled $191 billion, or 38% of goods exports, Sberbank CIB analysts said.

The central bank's move could result in a slight decline in market activity, but excessive FX supply remains in place, Promsvyazbank analysts said in a note. The rouble will also find support from a record 3 trillion roubles ($37.40 billion) companies are due to pay in taxes this month, for which some export-focused firms need to sell foreign currency, according to analysts surveyed by Reuters.

"We think it could reach 75 (to the dollar) next week, as oil and gas exporters will be actively selling FX," Sberbank CIB said. Russian stock indexes were higher after a short-lived slide in early trade.

The dollar-denominated RTS index was up 3.5% at 963.8 points. The rouble-based MOEX Russian index rose 2% to 2,363.2 points. Shares in Russia's largest lender Sberbank and VTB outperformed the market, gaining around 3% a day after the Russian central bank allowed banks to temporarily not publish financial results.

($1 = 80.2040 roubles)