MOSCOW, Sept 29 (Reuters) – The Russian ruble hit a more than two-month high against the dollar on Thursday as geopolitical headwinds halted a tepid recovery in stock markets as President Vladimir Putin braced for a annex four Ukrainian territories.
Putin will begin officially annexing 15% of Ukrainian territory on Friday, presiding over a ceremony in the Kremlin to declare the regions part of Russia following referendums that Ukraine and the West have rejected as illegitimate.
As of 12:17 GMT, the ruble was up 0.9% against the dollar at 57.00, hitting 56.5450 earlier, its strongest point since July 22.
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The Russian currency had gained 0.4% to trade at 55.25 against the euro, earlier touching 54.5750, its strongest since July 1. It had strengthened by 0.5% against the yuan at 7.985.
Finance Minister Anton Siluanov again mentioned that the government would prefer a weaker rouble, announcing on Wednesday a new price limit for Russia’s fiscal rule that diverts excess oil revenue to its wealth fund of $62-$63 a year. barrel.
Siluanov also announced major borrowing plans for next year to help finance the budget deficit amid rising spending and raised the possibility of resuming foreign exchange intervention, this time with the Chinese yuan.
“Words about the possibility of carrying out currency interventions as early as 2022 under the ‘old rules’ sound like a ‘call for help’ due to the frantic strengthening of the ruble,” said Dmitry Polevoy, chief investment officer at Locko Invest. .
“The main question is whether the budget can afford it given the growing need for additional spending.”
The ruble has been supported by capital controls and a slump in imports since Putin sent troops to Ukraine in February. Geopolitical risks also remain elevated, with further US and EU sanctions expected soon.
“For now, the ruble is supported by fears that further sanctions from the West could cripple dollar trading in Russia,” Alor Broker said in a note. “That’s why a lot of people are getting out of the dollar.”
STOCK RECOVERY
BCS Global Markets said geopolitical risks should prohibit any major advances in Russian stock indices, which reduced initial gains.
The dollar-denominated RTS index (.IRTS) fell 0.5% to 1,069.8 points. Russia’s rouble-based MOEX index (.IMOEX) was down 1.4% at 1,936.0 points, heading back to February lows hit on Monday.
“Over the next few days, the Russian market is expected to trade in a narrow band – investors will likely remain on the close hoping for more clarity,” BCS said.
The Moscow Stock Exchange (MOEX.MM), Russia’s largest stock exchange, has gradually restored some order to financial markets, welcoming back some non-resident investors to some instruments and extending trading hours for others.
The exchange plans to allow non-residents of “friendly” jurisdictions to return to the derivatives market soon, it said on Thursday, but amid market volatility, the head of the exchange’s supervisory board , Sergei Shvetsov, did not rule out further suspensions of trading, without specifying on which markets.
“We cannot rule out black swans in the future,” Shvetsov told a financial forum. “If there is another situation, there will naturally be suspensions.”
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Reporting by Alexander Marrow; additional reporting by Elena Fabrichnaya; Editing by Angus MacSwan and Alex Richardson
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