MOSCOW--Renewed concerns about a fresh round of Western
sanctions against Russia pressured the already battered ruble
Monday.
A surge in fighting in eastern Ukraine, which killed around 30
civilians in the Kiev-controlled town of Mariupol over the weekend,
prompted U.S. and European leaders to threaten new sanctions
against Moscow. The threat crowns a wide range of factors that have
already hit the Russian currency.
By 0930 GMT, the ruble had fallen 2.1% to 65.6 against the
dollar and shed 2.4% to 73.8 versus the euro, while the price of
Brent crude had also declined 2%.
The ruble came under pressure as the market was cutting exposure
to Russia-related risks on the back of deterioration of an already
shaky situation in Ukraine, said Igor Akinshin, a trader at Alfa
Bank in Moscow.
"We see a rather strong ditching of Russian risks on the back of
deterioration of an already shaky situation in Ukraine," said Igor
Akinshin, a trader at Alfa Bank in Moscow.
Although it isn't clear when any new sanctions against Russia
could materialize, Western penalties have so far proved to have a
clearly negative impact on Russia, along with massive capital
flight last year. This year, the sanctions, which cut off Russian
banks and companies from global capital markets, are widely
expected to push the commodity-dependent economy into contraction
for the first time since 2009.
The Bank of Russia has been actively supplying the market with
foreign currencies after a domestic deficit of dollars and euros
steered the ruble to record lows in mid-December. But the central
bank's activity wasn't enough to ease concerns about state-driven
demand for hard currencies at times of restricted access to the
international debt market.
Later Monday, the country's No. 1 oil producer Rosneft is
expected to raise up to 400 billion rubles ($6.1 billion) by
selling bonds. The move follows a similar one in mid-December, when
Rosneft raised 625 billion rubles just one day, fueling concerns
that it would use the proceeds to buy foreign currencies just a day
before the ruble crashed to its weakest ever level of 80.1 against
the dollar. Rosneft denied that bought foreign currencies with the
proceeds.
The ruble, which has lost more than 10% against the dollar so
far this year, also remained under pressure amid concerns that
Standard & Poor's will cut Russia's sovereign rating to junk.
Although such expectations have been in place over the past few
weeks, an actual downgrade will only add to the negative sentiment.
The rating decision is expected by the end of this month.
The local tax payment period may ease pressure on the ruble as
companies have to pay around 550 billion rubles by the end of the
day, according to ING Bank estimates. Tax payments usually prompt
export-focused companies to convert part of their dollar and euro
revenues to meet local liabilities.
Write to Andrey Ostroukh at andrey.ostroukh@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
