Rouble slips back towards record lows in volatile Moscow trade

MOSCOW (Reuters) – The rouble slipped back towards record lows against the dollar and euro in volatile Moscow trade on Friday, after Russia’s credit rating was cut deeper into junk by S&P and as talks over the war in Ukraine failed to reach a breakthrough.

S&P cut Russia’s rating less than a week after dropping it from investment grade, as international sanctions ramped up the chances of a default.

There were signs of tentative progress in talks between Russia and Ukraine on Thursday, with the countries agreeing on the need for humanitarian corridors to help civilians escape Russia’s invasion, but no major resolution.

Meanwhile, news that a building at a Ukrainian nuclear complex was set ablaze during intense fighting put investors on edge. The fire was later extinguished and officials said the plant was operating normally.

“Uncertainty lingers – the negotiations thus far have failed to deliver a breakthrough,” BCS Global Markets said in a research note.

Dmitry Polevoy, investment director at Locko Invest, said the market remained highly illiquid.

He cautioned that the sanctions imposed on Russia over the Ukraine conflict – which Moscow terms a “special operation” that it says is not designed to occupy territory – were serious and the economy faced a shock of a magnitude not seen in a long time.

At 0918 GMT, the rouble was more than 3% weaker against the dollar at 109.5 having earlier neared the record low of 118.35 struck on Thursday. Against the euro, the Russian currency weakened more than 6% to 125.2.

The Moscow Exchange’s stock section remained largely closed on Friday, the fifth day of restrictions imposed by the central bank.

On Friday the Russian central bank lowered the commission on foreign exchange purchases by individuals via brokers to 12% from 30%. Analysts said an earlier move to hike the commission to 30% for purchases of currencies like the dollar, euro, and British pound had led to distortions like a surge in demand for other currencies like the Chinese yuan and Japanese yen.

In another move to try to stabilize wildly fluctuating markets, the Moscow Exchange imposed a ban on short-selling of the euro currency and stock instruments.

Russia’s National Settlement Depositary said on Friday it had temporarily suspended some foreign currency conversion operations, declining to give the reason for the move. Traders told Reuters there was a lack of euros in particular for settlements.