Rouble falls back to 58 vs dollar, Russian stocks extend recovery

The Russian rouble weakened on Thursday after giving back some late gains that had seen it surge to 57 against the dollar in the previous session, while stocks extended a recovery from February lows hit on Monday, buffeted by geopolitical headwinds, Reuters reported.
At 0718 GMT, the rouble was 0.8% weaker against the dollar at 58.00, having strengthened late on Wednesday to 57.00, close to the two-month high of 56.6525, hit last week.
The Russian currency had lost 0.7% to trade at 55.85 versus the euro and had shed 0.4% against the yuan to 8.051.
Finance Minister Anton Siluanov again mentioned that the government would prefer a weaker rouble, as he announced on Wednesday a new cut-off price for Russia’s budget rule that diverts excess oil revenues into its wealth fund of $62-63 per barrel.
Siluanov also announced hefty borrowing plans for next year to help finance the budget deficit amid increased spending and floated the possibility of resuming FX interventions, this time with China’s yuan.
“The words about possibly conducting foreign currency interventions as early as 2022 according to the ‘old rules’ resembles a ‘cry for help’ due to the rouble’s unrestrained strengthening,” said Dmitry Polevoy, head of investment at Locko Invest.
“The main question is whether the budget can afford it in light of the growing need for additional spending.”
The rouble has been supported by capital controls and a collapse in imports since President Vladimir Putin sent troops into Ukraine in February. Geopolitical risks also remain elevated, with more U.S. and EU sanctions expected soon.
BCS Global Markets said geopolitical risks should prohibit any major leg up for Russian stock indexes, which opened higher.
The dollar-denominated RTS index was up 0.2% to 1,076.2 points. The rouble-based MOEX Russian index was 0.8% higher at 1,979.7 points.
“In the coming days, the Russian market should trade in a narrow band – investors are likely to sit on the fence hoping for more clarity,” BCS said.