Russian rouble slips back towards more than 14-month low vs dollar

The Russian rouble weakened on Thursday, heading back towards the more than 14-month low against the dollar hit in the previous session, under pressure from geopolitical risk and unfavourable foreign currency dynamics.

The Russian rouble weakened on Thursday, heading back towards the more than 14-month low against the dollar hit in the previous session, under pressure from geopolitical risk and unfavourable foreign currency dynamics. At 0726 GMT, the rouble was 0.3% weaker against the dollar at 84.45. It fell to 85.03 on Wednesday, its weakest since early April, 2022.

It was steady at 91.39 versus the euro and had shed 0.4% against the yuan to 11.79. Russia's deteriorating foreign trade figures, limited foreign currency supply from exporters and strong FX demand domestically are all weighing on the rouble.

Meanwhile, the rouble has become more thinly traded, making it susceptible to sharp swings since Moscow was targeted by Western sanctions over its military campaign in Ukraine, with fewer foreign investors able to access Russian markets. A trader at a major Russian bank this week said the market was waiting for the rouble to strengthen once exporters, for whom a weak rouble is beneficial, begin to convert foreign exchange revenues to pay local taxes later in the month.

Lower export earnings have hampered the rouble this year, especially as imports, which slumped in 2022, recover. Expectations that Russia will post a much narrower current account surplus this year and persistently weak commodity conditions are worsening the long-term outlook, said Dmitry Polevoy, head of investment at Locko-Invest.

"In the short term, we expect the rouble's increased volatility to continue, assuming that upcoming tax and dividend payments will allow the rouble to return closer to 80 per USD by the end of June-early July," Polevoy said. Brent crude oil, a global benchmark for Russia's main export, was up 0.1% at $73.24 a barrel.

Russian stock indexes were mixed. The dollar-denominated RTS index was down 0.2% to 1,033.6 points. The rouble-based MOEX Russian index was 0.2% higher at 2,770.5 points.

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