MOSCOW: The rouble recovered ground on Thursday, gaining over 1% against the dollar and pulling away from the near 15-month low hit in the previous session, as investors' fears of an imminent escalation of tensions over Ukraine eased.
The rouble plunged to its lowest since early November 2020 on Wednesday before paring losses, as the United States said it had set out a diplomatic path to address sweeping Russian demands in eastern Europe. Moscow on Thursday said it had an interest in continuing dialogue.
By 1153 GMT, the rouble was 1% stronger against the dollar at 78.65, recovering all of Wednesday's losses. It had dived to 80.4125 in the previous session. Against the euro, the rouble gained 1.8% to 87.77.
The trigger for a sharp rise in the rouble may have been Belarus saying Russian troops would leave its territory once military drills, scheduled to end in February, are over, market participants said.
"There was already active dollar selling since this morning, but the news from Belarus accelerated this process," a dealer at a large Russian bank said.
Russian rouble makes slight recovery after sell-off on Ukraine tensions
Russian and Ukrainian sovereign dollar bonds rose and the cost of insuring exposure to Russia eased, while yields on Russia's 10-year OFZ bond yields eased to 9.66%, down from their highest since early 2016 of 9.86%. Yields move inversely to prices.
Deputy Finance Minister Timur Maksimov told Reuters any tightening of western sanctions on an already pressured Russian domestic bond market would make borrowing more expensive for the government.
The rouble outperformed other emerging market currencies, which were largely down against a stronger dollar, resurgent after U.S. Federal Reserve Chairman Jerome Powell on Wednesday surprised investors by leaving the door open to larger and faster-than-expected interest rate hikes.
"We note that the rouble now looks markedly oversold, which despite the negative background, may affect a sharp recovery in the rouble's position," Promsvyazbank analysts said in a note.
Volatility has characterised Russian markets as the West has feared Russia is poised to invade neighbouring Ukraine, something Moscow has repeatedly denied. The West has threatened sanctions with profound economic effects should Russia attack.
British Prime Minister Boris Johnson said he was discussing banning Russia from the SWIFT global payment system with the United States, one of the harshest measures being considered.
Brent crude oil, a global benchmark for Russia's main export, was up 0.7% at $90.55 a barrel, at a more than seven-year high.
Russian stock indexes continued their recovery after a deep sell-off on Monday.
The dollar-denominated RTS index was up 4.1% at 1,378.1. The rouble-based MOEX Russian index was 2.5% lower at 3,440.9.
The market rout has cast doubt over the prospects for Russian initial public offerings this year.
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