Rouble hits over 16-month low under FX demand pressure

By Alexander Marrow

(Reuters) – The rouble hit a more than 16-month low on Wednesday, hampered by strong foreign currency demand and limited supply, with Russia’s shrinking trade surplus and widening budget deficit also hurting sentiment.

By 1023 GMT, the rouble was 0.2% weaker against the dollar at 97.32, earlier hitting 97.48, its weakest point since March 25, 2022.

It had lost 0.14 to trade at 106.84 versus the euro and shed 0.3% against the yuan to 13.46.

“The limited supply of foreign currency from exporters continues to exert pressure on rouble positions, due to both problems with repatriating funds and also reduced export supplies in the face of steady demand among importers,” Promsvyazbank analyst Egor Zhilnikov said.

The rouble has weakened almost 6% against the dollar in August already, after losing the support of a month-end tax period that usually sees exporting firms convert foreign exchange revenue to meet local liabilities.

It has been under pressure all year from Russia’s shrinking balance of trade, as export revenues fall and imports rebound, dropping around 28% year-to-date from levels near 70 to the dollar.

Since an abortive armed mutiny in late June, the rouble has dropped almost 13%.

“It is possible that the dollar-rouble pair reaching the 100 mark will force (Russia’s) monetary authorities to take some steps to curb devaluation, and exporters to increase sales of FX earnings,” Alexey Antonov of Alor Broker wrote in a note.

Yields on Russia’s benchmark 10-year OFZ bond were at their highest since April 2022 at 11.66%, well above Russia’s 8.5% key rate.

Antonov said the rouble’s depreciation was largely responsible for the drop in bond prices, which move inversely to their yields.

Russia’s finance ministry, which on Tuesday said Russia’s budget deficit had widened to around $29 billion in January-July, will hold two OFZ auctions later on Wednesday.

, a global benchmark for Russia’s main export, was 0.7% higher at $86.80 a barrel.

Russian stock indexes were steady.

The dollar-denominated RTS index was unchanged at 1,000.1 points. The rouble-based MOEX Russian index was 0.1% higher at 3,089.1 points.