Thu | May 23, 2019

Russian rouble tremors continue on sanctions fears

Published:Friday | August 24, 2018 | 12:00 AM
People walk past a display with currency exchange rates in central Moscow, Russia, on Monday, December 1, 2014.

The Russian Central Bank said Thursday it will halt foreign currency purchases, a move that helped the rouble to recover from its lowest level against the dollar since 2016.

The rouble, which had endured another day of turbulence amid the threat of further US sanctions, made gains after the central bank statement.

The rouble dropped by more than one per cent on the Moscow exchange to briefly top 69 against the dollar, the lowest since April 2016, but recouped those losses to trade slightly up on the day at 67.8 as of late afternoon.

The central bank said it wouldn't buy foreign currency until the end of September "to reduce the volatility on financial markets." An earlier foreign currency buy announced this week by the central bank had increased downward pressure on the rouble.

The latest tremors came amid talk that the United States was readying further sanctions. On Tuesday, the US slapped sanctions on two Russian shipping companies over alleged oil trading with North Korea.

It could also impose much broader sanctions as a consequence of the poisoning of ex-spy Sergei Skripal in Britain in March.

The rouble's weakness has come despite a sharp pickup in oil prices to US$75 a barrel and an improvement in the state of the Russian economy.

"The rouble should not be this weak based on, shall we say, fundamentals," said Chris Weafer, a Moscow-based senior partner at the Macro Advisory consultancy.

"The rouble should actually be a lot stronger than we are seeing it, and the reason it's not is directly linked to the sanctions coming out of the US."

Russian President Vladimir Putin called sanctions against Russia "counterproductive and senseless" following talks Wednesday with his Finnish counterpart Sauli Niinisto.

The last time the rouble reached similar lows was in early 2016 when oil prices fell sharply. Russia is heavily dependent on revenues from its oil exports, but a weaker rouble can help government revenues since oil is sold in dollars.