Russian rouble rebounds from more than three-week lows vs dollar, euro

The rouble bounced back from more than three-week lows against the dollar and euro in Moscow trade on Monday, supported by strong fundamentals while buffeted by lower oil prices and the end of a favourable month-end tax period. By 1323 GMT, the rouble was 2.4% stronger against the dollar at 60.17, having earlier touched 62.4875, its weakest point since July 7.

The rouble bounced back from more than three-week lows against the dollar and euro in Moscow trade on Monday, supported by strong fundamentals while buffeted by lower oil prices and the end of a favourable month-end tax period.

By 1323 GMT, the rouble was 2.4% stronger against the dollar at 60.17, having earlier touched 62.4875, its weakest point since July 7. It had gained 1.6% to trade at 61.50 versus the euro. Analysts noted that the Russian currency retains strong fundamentals. "Demand for foreign currencies from importers and the population is not outweighing supply from exporters," said Banki.ru analyst Bogdan Zvarich.

High oil prices and a strong current account surplus stemmed some losses last week, but the rouble still lost around 7% to the greenback. "The rouble weakened steadily due to the end of the tax and dividend period," said Dmitry Polevoy, head of investment at Locko Invest.

The tax payment period that usually sees exporting firms convert foreign currency revenues to pay local liabilities ended last week. The central bank's decision to cut its key rate to 8% last month and a hint at further possible cuts also reduced the upside pressure on the rouble.

Polevoy said it was quite possible that the rouble could soon weaken temporarily to 63-65 against the dollar. The market is also anticipating news that the government will soon tweak and reinstate Russia's budget rule that diverts excess oil revenues into its rainy-day fund with a new cut-off price.

Officials may turn to currency interventions to try to curb the rouble's strengthening. The rouble is the world's strongest-performing currency so far this year, boosted by measures to shield Russia's financial system from Western sanctions imposed after Moscow sent troops into Ukraine on Feb. 24.

These include restrictions on Russian households withdrawing foreign currency savings. The central bank extended restrictions on forex cash withdrawals by six months on Monday, in an expected move. Brent crude oil, a global benchmark for Russia's main export, was down 3.6% at $100.2 a barrel, falling from early July highs struck last week. Oil prices under pressure will impact the rouble, said Promsvyazbank analysts.

Russian stock indexes were mixed. The dollar-denominated RTS index was up 1.7% to 1,147.8 points, while the rouble-based MOEX Russian index was 1% lower at 2,192.0 points.