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UPDATE 2-Rouble moves lower despite tax period boost
October 20, 2014 / 6:42 AM / 3 years ago

UPDATE 2-Rouble moves lower despite tax period boost

(Updates prices and adds comments)

MOSCOW, Oct 20 (Reuters) - The rouble weakened against the dollar and the euro on Monday, extending a dramatic slide that has seen the currency reach record lows, but firms converting foreign currency into roubles to pay taxes checked the losses.

At 1250 GMT the was 0.66 percent weaker at 41.02 against the dollar, 0.8 percent weaker at 52.41 against the euro, and 0.74 percent weaker at 46.15 against a dollar-euro basket monitored by the central bank.

The Russian currency has been pressured by falling oil prices, Western sanctions restricting Russian firms’ access to international capital markets and a stronger dollar, prompting the central bank to spend more than $13 billion to defend the rouble since the start of the month.

Further souring sentiment, Moody’s Investors Service cut Russia’s sovereign debt rating to Baa2 from Baa1 after the market closed on Friday, becoming the second rating agency to cut Russia’s ratings this year.

“There are sales (of foreign currency) by exporters, and I think that over 41 roubles per dollar they will increase,” said a currency dealer at a large Western bank in Moscow. Russian firms must pay taxes to the state budget during an end-of-month window that started at the end of last week.

“Those sales are for the moment keeping the basket from reaching the central bank’s offer, although there is still a firm foreign currency bid on the market.”

The central bank automatically steps in to defend the rouble once it breaches the limits of its trading band against a dollar-euro basket, moving the band by 5 kopecks every time it has spent $350 million in interventions.

The rouble’s value of 46.15 against the basket meant that on Monday it had yet to break through the limits of the band, which stood at 37.30 to 46.30 as of Oct 17.

Analysts say the end-of-month tax period and a potential recovery in oil prices could support the rouble, but demand for dollars remains high due to Western sanctions restricting Russian firms from raising international capital.

An overall solution to the political crisis in Ukraine still appears remote despite a tentative agreement reached on Friday to enable Russian gas supplies to Ukraine over the winter.

Brent crude futures were slightly weaker on Monday at around $86 a barrel, resuming a downward trend that took the global oil benchmark to near a four-year low last week.

Russian shares also headed lower, weighed down by the Moody’s rating cut as well as a gloomy mood on European stock markets.

The dollar-denominated RTS index was 1.5 percent lower at 1,057 points, while its rouble-based peer MICEX traded 0.6 percent lower at 1,376 points. Top bank Sberbank was 0.7 percent down, while state oil producer Rosneft was 1 percent lower.

For rouble poll data see

For Russian equities guide see

For Russian treasury bonds see

Russia in graphics: link.reuters.com/dun63s (Reporting by Alexander Winning, Vladimir Abramov and Lidia Kelly; Editing by Jason Bush and Alison Williams)

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