Russian rouble recovers after sell-off led by sanction risk

MOSCOW: The Russian rouble gained on Tuesday, pulling away from the 74 mark to the US dollar, as oil prices climbed and emerging market currencies regained ground while the dollar retreated from a near one-month high.

Risk of sanctions linked to the arrest of Kremlin critic Alexei Navalny upon his return to Russia for the first time since being poisoned last summer hit the rouble on Monday, with the currency shedding 1% at one point before paring some losses.

By 1210 GMT, the rouble was 0.3% stronger against the dollar at 73.75 and was flat against the euro, trading at 89.45.

The rouble should stay within the range of 73.5 to 74 versus the dollar on Tuesday, said Dmitry Polevoy, head of investment at Locko-Invest, who said geopolitical risks have been present in Russia for a long time.

"A greater negative can only be expected in the case of a qualitative change in the sanctions story after [US President-elect Joe] Biden's inauguration, but we expect clarification of this issue only in the coming months," he said.

Biden's $1.9 trillion stimulus plan now appears priced in and the COVID-19 pandemic continues to worsen, said BCS Global Markets analysts.

"For Russia, with geopolitical risks rising due to Navalny's detention, this backdrop amplifies concerns that a correction may be on the horizon," they said.

The rouble no longer has support from foreign currency sales after the finance ministry switched to a buying regime, starting on Jan. 15. It plans to sell 7.1 billion roubles ($96.3 million) worth of currencies a day over the next month.

The central bank, which reports interventions with a two-day lag, will publish the total settlement figure for Jan. 15 and Jan. 18 on Wednesday. The US market was closed for Martin Luther King Jr. Day on Monday.

Brent crude oil, a global benchmark for Russia's main export, was up 1.3% at $55.44 a barrel, supporting Russian stock indexes.

The dollar-denominated RTS index was up 0.4% to 1,481.1 points. The rouble-based MOEX Russian index was 0.1% lower at 3,467.4 points.