Russian rouble weakens as tax period passes, COVID cases surge
- The rouble shed 0.8% to 72.67 against the dollar.
- Most global bourses are revealing concerns over renewed COVID-triggered lockdowns (actual and threatened)," said BCS Global Markets.
MOSCOW: The Russian rouble fell on Tuesday, losing ground as the peak of a favourable domestic tax period passed and concerns over surging coronavirus cases at home and abroad tempered risk appetite.
The rouble shed 0.8% to 72.67 against the dollar at 1128 GMT, its weakest since June 24. The Russian currency eased 0.6% to 86.48 versus the euro.
"Most global bourses are revealing concerns over renewed COVID-triggered lockdowns (actual and threatened)," said BCS Global Markets in a note, pointing to Russia as a place the Delta variant was spreading.
After Russia recorded its highest number of daily deaths from COVID-19, the Kremlin admitted the country would fail to vaccinate 60% of its population by the autumn as planned due to sluggish demand for the shots.
The rouble drew some support from expectations of more interest rate increases. On Monday, Central Bank Governor Elvira Nabiullina sent a hawkish signal, saying the bank would consider raising its key rate by between 25 and 100 basis points from the current 5.5% at its next board meeting on July 23.
Higher rates, which are designed to keep inflation in check but raise borrowing costs and negatively impact economic growth, provide support for the currency from a yield point of view and increase the appeal of bank deposits.
Nabiullina's comments are the only factor currently supporting demand for the rouble, said Dmitry Polevoy, head of investment at Locko-Invest in a note.
The central bank needs to safeguard the rouble's purchasing power and limit imported inflation, which has become an acute problem, said John Hardy, Saxo Bank's chief FX strategist.
The rouble is seen firming to 68 versus the dollar and 85 against the euro by year-end, Hardy said.
Brent crude oil, a global benchmark for Russia's main export, was down 0.4% on the day at $74.40 a barrel, pushing Russian stock indexes lower.
The dollar-denominated RTS index fell 1.5% to 1,644.3 points and the rouble-based MOEX Russian index off 0.9% at 3,791.2 points.
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