Ruble weakens under pressure from reduced foreign currency supply

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The Russian ruble weakened against the dollar on Tuesday, pressured by reduced foreign currency inflows from exporters at the start of the month and lower FX sales from the Russian state in July.

By 0732 GMT the ruble was 0.9 percent down at 87.40 against the dollar.

Sanctions on Moscow Exchange and its clearing agent, the National Clearing Centre (NCC), led to a range of varying prices and spreads as trading shifted to the over-the-counter (OTC) market on June 14, obscuring access to reliable pricing for the Russian currency.

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The ruble has also become more volatile in lower-volume trade, making sharp swings quite common.

Against the yuan, which had already become the most traded foreign currency in Moscow before the latest sanctions were imposed, the ruble shed 0.6 percent to 11.96, according to analysis of the OTC market.

It was down 1.6 percent at 95.29 against the euro.

The ruble has lost support from month-end tax payments that usually require exporters to convert foreign currency to meet local liabilities.

Reduced FX sales by the central bank in the second half of the year and increased purchases by the finance ministry in July have also reduced the ruble’s propensity to strengthen.

High oil prices, capital controls and high interest rates helped to lift the ruble to one-year highs in June. The central bank has signaled that an increase to interest rates from 16 percent is highly likely when it next meets on July 26.

Analysts polled by Reuters expect the bank to increase its key rate to 18 percent.

“Fundamentally, the ruble looks very strong,” said Alor Broker’s Alexei Antonov. “High interest rates will stimulate everyone, including exporters, to invest in ruble instruments.”

Brent crude oil, a global benchmark for Russia’s main export, was down 0.3 percent at $85.50 a barrel.

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