Russian rouble steadies after early losses, but risks limit gains

MOSCOW: The Russian rouble shrugged off early losses to firm on Tuesday, heading away from the more than one-month low hit in the previous session, but still hampered by geopolitical risks related to the arrest of Kremlin critic Alexei Navalny.

The threat of new sanctions against Moscow saw the rouble's January gains evaporate last week. The pressure was only partially relieved this week when the European Union said it would refrain from fresh sanctions on Russian individuals if the Kremlin releases Navalny after 30 days.

By 1220 GMT, the rouble was 0.2% stronger against the dollar at 75.21, pulling away from the more than one-month low of 75.8675 hit on Monday.

It had gained 0.2% to trade at 91.32 versus the euro .

"Few markets look convincing, least of all Russia, with oil demand concerns and recent news-flow increasing the country's risk profile," said BCS Global Markets.

Police detained more than 3,700 people across Russia on Saturday as protesters demanded Navalny be freed from jail where he is serving a 30-day stint for alleged parole violations that he denies.

More protest action has been scheduled for Sunday.

"The near-term outlook for protest activity could have a say on the exchange rate, although it cannot yet completely outweigh the impact of a favourable balance of payments, while there is no noticeable tightening of sanctions," said Dmitry Polevoy, head of investment at Locko-Invest.

In the absence of positive news on US fiscal stimulus, hopes of a possible delay to the recovery package were hampering the rouble and other emerging market currencies, Sberbank CIB analysts said in a note.

Domestically, the rouble lost some support as the peak of a month-end tax period that generally prompts export-focused companies to convert their foreign currency into roubles to meet local liabilities passed.

Brent crude oil, a global benchmark for Russia's main export, was up 0.5% at $56.16 a barrel, supporting Russian stock indexes.

The dollar-denominated RTS index was up 0.9% to 1,424.1 points. The rouble-based MOEX Russian index was 0.1% lower at 3,400.1 points.