Russian rouble tumbles to 3-week low, Rusal shares leap on merger talk

The rouble tumbled to a three-week low on Tuesday, sliding past 58 to the dollar, while shares in aluminium producer Rusal leapt as Russian businessman Vladimir Potanin hinted at a possible merger with mining giant Nornickel. Investors were looking for clues on when Russia may intervene in the currency market, something Finance Minister Anton Siluanov said Russia could turn to as it tries to keep a lid on the rouble's strengthening.

The central bank did not immediately respond to a request for comment on what caused the rouble's sharp drop on Tuesday. The finance ministry said it did not plan to use extra budget revenues to buy foreign currency or gold, as it eyed increased budget revenues this month thanks to higher oil prices.

By 0904 GMT, the rouble was 5.4% weaker against the dollar at 58.18, its weakest point since June 14. The unit had lost 3.5% to trade at 59.77 versus the euro, earlier slipping to a three-week low of 59.95. The rouble's recent slump from more than seven-year highs hit last Wednesday is just a correction on the market, said Alor Broker in a note.

"It is too early to talk about a break in the rouble's strengthening trend," Alor Broker analysts wrote. "Russia's balance of payments will continue to remain very strong, importers will not recover their positions quickly. "Only by introducing a new budget rule can the situation on Moscow Exchange's currency market change radically."

The rouble is still the world's best-performing currency https://emea1.apps.cp.thomsonreuters.com/Apps/NewsServices/mediaProxy?apiKey=6d416f26-7b24-4f31-beb6-1b5aa0f3fafb&url=http%3A%2F%2Ffingfx.thomsonreuters.com%2Fgfx%2Frngs%2FGLOBAL-CURRENCIES-PERFORMANCE%2F0100301V041%2Findex.html this year, boosted by measures - including restrictions on Russian households withdrawing foreign currency savings - taken to shield Russia's financial system from Western sanctions imposed after Moscow sent troops into Ukraine on Feb. 24. Proceeds from commodity exports and a sharp drop in imports are further factors behind the currency's gains. But the rouble has now lost the support of last week's tax-driven dollar and euro sales.

Expectations of the imminent launch of currency interventions may continue to pull support from the rouble on Tuesday, said Promsvyazbank analysts. METALS MERGER

Potanin, the largest shareholder at Nornickel, said he was ready to discuss a possible merger of the mining giant with Rusal, in part as a defence against Western sanctions. Rusal's Moscow-listed shares leapt more than 20% before settling around 4% higher. Shares in En+, Rusal's majority shareholder, were 8.2% higher in Moscow. Nornickel shares fell 5.7%.

Russian stock indexes were lower. The dollar-denominated RTS index was down 4.9% to 1,188.0 points. The rouble-based MOEX Russian index was 0.5% lower at 2,194.0 points.

Moscow Exchange said it would resume evening trading on the derivatives market from July 12 due to high demand from clients, has introduced a raft of restrictions soon after Russia began what it called a "special military operation".

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