Rouble strengthens on local taxes, Venezuela in focus

MOSCOW: The Russian rouble gained on Thursday, buoyed by local demand linked to month-end tax payments but investors watched developments in Venezuela that could have repercussions on the Russian market.

The rouble stood at 65.91 versus the dollar for the first time since Nov. 23, up 0.3 percent from the previous day .

Venezuela came into focus after its opposition leader, Juan Guaido, declared himself interim president on Wednesday, winning the backing of Washington and many Latin American nations.

But Russian officials condemned the move as illegal, raising concerns of more geopolitical tensions between Moscow and the West.

If Moscow supports President Nicolas Maduro, who has led the oil-rich nation since 2013, it may give the U.S. Congress a reason to resume sanctions against Russia, said Kirill Tremasov, the head of research at Loko-Invest.

"Developments in Venezuela are certainly the key factor for markets in the coming days," said Tremasov, a former head of the forecasting department at the economy ministry.

Over the past few years, Moscow has become Venezuela's lender of last resort. The Russian government and oil giant Rosneft have handed Venezuela at least $17 billion in loans and credit lines since 2006, according to Reuters calculations.

"The most unpleasant scenario for Rosneft now is the change of power in the country and the revision of contracts," said Dmitry Marinchenko, an analyst with Fitch Ratings in Moscow.

Rosneft could lose up to about $3 billion of its prepayment for supplies of Venezuelan oil, Marinchenko said, adding that the company's exposure to Venezuela was relatively small.

"These are small investments in terms of these companies' portfolios, in terms of the revenues," said Maxim Orlovsky, managing director of Renaissance Capital.

"At the most they might have poor results in a quarter, and even that is not certain."

Rosneft shares underperformed the market on Thursday, losing 2.6 percent on the day.

Russian stock indexes were mixed. The dollar-denominated RTS index was up 0.2 percent to 1,188.8 points. The rouble-based MOEX Russian index was 0.1 percent lower at 2,490.2 points

ROUBLE OUTLOOK

The rouble retains support from high oil prices and month-end taxes that usually prompt export-focused companies to convert dollar revenues to meet local liabilities.

In the next few days, the rouble could strengthen to 65.70 to 65.80 against the dollar, said Artem Zvonarev, a trader at VTB Capital.

"Today exporters' support can still be felt, but in the longer term the rouble's dynamics and its direction will be more dependent on speculators and financial investors," said Dmitry Polevoy, chief economist at Russian Direct Investment Fund.

The rouble could reach 64.5 against the dollar in the first quarter, VTB Capital analysts said in a note, because the global environment is likely to support emerging markets.

Brent crude oil, a global benchmark for Russia's main export, was down 0.4 percent at $60.91 a barrel, trading away from its lowest level since mid-2017 of $49.93 it hit last month.