Rouble eases as Sino-U.S. tensions outweigh Russia's Fitch rating upgrade

Credit: REUTERS/MAXIM SHEMETOV

The Russian rouble weakened on Monday, shrugging off a sovereign rating upgrade by Fitch, as the trade war between Washington and Beijing fuelled risk aversion across emerging markets.

MOSCOW, Aug 12 (Reuters) - The Russian rouble weakened on Monday, shrugging off a sovereign rating upgrade by Fitch, as the trade war between Washington and Beijing fuelled risk aversion across emerging markets.

U.S. President Donald Trump on Friday said he was not ready to make a deal with China and even called a September round of trade talks into question.

The rouble was 0.3% weaker against the dollar at 65.46 RUBUTSTN=MCX by 0730 GMT, hovering near its weakest level since early June of 65.70 touched last week. Versus the euro, the rouble slid 0.1% to 73.17 EURRUBTN=MCX.

ING Economics said the rouble was "vulnerable to risks of contagion coming from global markets", as Russia's current account surplus in the third quarter would be fully outweighed by the central banks' daily purchases of foreign currency for state reserves.

At the same time, inflows of foreign investors' money into Russian OFZ bonds, which have supported the rouble this year, are running out of steam, ING Economics said in a note.

The Russian currency's weakness came despite an unexpected upgrade to Russia's investment rating, as Fitch raised the country's sovereign rating to "BBB" from "BBB-" late on Friday.

Fitch, which had maintained ratings on Russia's debt at "BBB-" since 2017, explained the move by citing Russia's robust fiscal and external balance sheets.

Still, the rouble has room to recover in coming weeks unless global risk sentiment deteriorates, VTB Capital analysts said.

Prices for oil, Russia's main export, edged lower on Monday amid worries about an economic slowdown and the Sino-U.S. trade war, which have led to a cut in the growth outlook for global oil demand.

Brent crude oil LCOc1 was little changed at $58.52 a barrel, having dropped earlier this month to as low as $55.88 last Wednesday from above $65 seen in late July.

The dollar-denominated RTS index .IRTS was up 0.6% to 1,297 points. The rouble-based MOEX Russian index .IMOEX was 0.5% higher at 2,694 points.

For Russian equities guide see RU/EQUITY

For Russian treasury bonds see 0#RUTSY=MM

(Reporting by Anna Rzhevkina Additional reporting by Vladimir Abramov Editing by Andrey Ostroukh and David Holmes)

((anna.rzhevkina@tr.com; +7 495 775 1242;))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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