MOSCOW: Russia's assets were weaker on Tuesday after Moody's ratings agency downgraded Russia's credit rating to below investment grade and as oil prices slipped, but losses were trimmed by some progress towards implementing a ceasefire in eastern Ukraine.
At 1040 GMT, the rouble was around 1.7 percent weaker against the dollar at 63.10 and lost 1.2 percent to 71.34 versus the euro. Shares were also lower, with the dollar-denominated RTS index down 3.3 percent to 881 points, while the rouble-based MICEX was 1.6 percent lower at 1,763 points.
Moody's downgraded Russia's sovereign rating to Ba1 from Baa3 late on Friday, citing the impact from the Ukraine crisis, a fall in oil prices and the rouble exchange rate.
Russian assets were also weighed down by a renewed weakening of the oil price, with benchmark Brent failing to hold on to last week's gains above $60 per barrel. Brent was also down slightly on Tuesday to around $58.7 per barrel.
Russian financial markets were closed on Monday because of a public holiday, but the rouble and Russia's sovereign Eurobonds dropped on international markets.
On Tuesday the yield on Russia's 2030 Eurobond was up around 10 basis points to 6 percent, having gained almost 500 basis points since Friday.
The yield on Russia's 10-year Treasury bond benchmark was around 13 percent on Tuesday, up 430 basis points since Friday.
Analysts said that the impact of the Moody's downgrade on Russian markets had been relatively limited because it had been largely expected by investors.
"Although the overwhelming majority of investors were already prepared for this development of events, forced sales will all the same take place. In particular this concerns the market for foreign debt obligations," Stanislav Kleshchev, chief investment analyst at VTB24, said in a note.
Analysts at VTB Capital said that the assumptions used by Moody's to justify its downgrade implied that net capital outflows from Russia would reach $270 billion in 2015, which the VTB Capital analysts said "seems extreme".
"In contrast, we expect capital outflows to moderate to $80-90 billion as the intensity of savings dollarisation is likely to decline in an environment of stabilising devaluation expectations and high interest rates," they said in a note.
Some analysts said that the negative factors weighing on Russian markets on Tuesday were partly offset by steps to implement a ceasefire in eastern Ukraine, though the situation there remains uncertain.
Pro-Russia separatists said they had begun withdrawing heavy weapons from the frontline, but the Ukrainian military, which says it won't pull back until fighting stops, reported further shelling.
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