Rouble surges, stocks fall as Russia holds Ukraine referendums

(Reuters) -The Russian rouble surged to new multi-week highs on Friday whereas shares fell in risky commerce as Moscow mobilises some 300,000 additional troops for the battle in Ukraine.

Regardless of President Vladimir Putin’s mobilisation order, the rouble hit its highest degree versus the U.S. greenback and euro since July in buying and selling in Moscow.

By 1153 GMT the rouble was 3.5% stronger towards the greenback at 56.79, its strongest degree since July 22. Towards the euro, the Russian foreign money had gained 4.4% to face at 55.05 after having firmed previous 55 at one level for the primary time since July 4.

Forex controls and month-end tax funds, which see Russia’s exporters convert their overseas foreign money earnings into roubles to make funds to the treasury, are offering a lift to the rouble regardless of geopolitical headwinds, analysts say.

The elevated provide of overseas foreign money from exporters and stories of extra sanctions towards Moscow from the European Union, which make overseas foreign money investments much less enticing, have been supporting the rouble, mentioned SberCIB Funding Analysis in a notice.

“Furthermore, in accordance with knowledge revealed within the media on Russia’s finances parameters, there can be no return to the finances rule and overseas foreign money purchases linked to this subsequent yr,” SberCIB mentioned.

“In reference to this, dangers of the rouble weakening have decreased,” SberCIB analyst Yury Popov mentioned.

The finance ministry hiked taxes on oil and fuel and mentioned it could not return to its typical finances rule till 2025.

The finances rule dictates how a lot of Russia’s revenues from oil and fuel exports are used for day-to-day authorities spending and the way a lot is diverted into the federal government’s sovereign wealth fund. Designed to easy boom-and-bust durations, it was suspended earlier this yr resulting from Russia’s new monetary scenario.

Nonetheless, Russian shares have been deep within the crimson on Friday as markets stay jittery over how Russia’s mobilisation drive will have an effect on the battle. The dollar-denominated RTS index dropped 0.9% to 1,163.3 factors. The rouble-based MOEX Russian index was 4.1% weaker at 2,100.4 factors.

Russian shares have seen heightened volatility all week in response to the mobilisation order and as Moscow levels referendums in 4 areas of Ukraine on becoming a member of Russia.

After surging in Thursday’s session on information it had sufficient free money circulate to pay interim dividends, shares in Gazprom fell again in step with the broader market on Friday, down 2.6% in rouble phrases.

“At this time the Russian market is dominated by detrimental sentiment … The Friday issue appears to be stronger than typical as market gamers should not risking preserving their lengthy positions over the weekend,” mentioned Zarina Saidova, an analyst at Moscow-based Finam funding agency.

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(Reporting by Jake Cordell and Alexander Marrow. Modifying by Alexander Smith, Kirsten Donovan and Gareth Jones)