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Rouble at 6-month lows vs dollar as emerging FX takes hit

FILE PHOTO -  Vendor counts Russian rouble banknotes at street market in KrasnoyarskRussia’s rouble hit six-month lows against the dollar, mirroring moves in other emerging market currencies, on expectations of higher interest rates in a small but growing group of major economies. The rouble hit 60.91 versus the dollar, its weakest since Jan 6, and 69.42 versus the euro, its weakest level since late November. “Rising yields in U.S. and Eurozone treasury bonds are playing a role in the weakening of the rouble and similar currencies,” said Denis Korshilov, head of markets at Citi in Moscow. Euro zone bond yields resumed their march upwards having paused, as focus shifted back to the pace of monetary tightening in the world’s largest economies. Janet Yellen starts a two-day testimony as the Federal Reserve prepares to unwind the massive hoard of bonds it bought to ease the financial crisis, while top ECB and Bank of England policymakers were speaking in Europe. As of 0813 GMT, the rouble was 0.9 percent weaker against the dollar at 60.75, in line with the South African rand that lost 0.9 percent of its value versus the greenback and the Turkish lira, which was also down 0.9 percent. Versus the euro, the rouble shed 0.9 percent to trade at 69.24. Some Russian market players said they were surprised by the rouble’s weakness, given recent stabilisation in the price of oil, Russia’s main export. Brent crude futures were down 0.3 percent at $46.76 per barrel. Moves in the rouble were exacerbated by thin market liquidity, typical for the summer season, said Ruslan Pshonkovsky, an analyst at Roseximbank. Steady yields of Russian 10-year benchmark treasury bonds at around 7.92 percent indicated that there was no massive ditching of the rouble assets. ING Bank said in a note to clients that the rouble’s weakness could be attributed to strong dollar purchases by a local market player. If such purchases prove to be short-lived, the rouble could pare losses, ING said. The market also eyes a monthly report on Russia’s balance of payments, and if the report surprises on the downside, it could add extra pressure on the rouble, ING said. Russian share indexes were down. The dollar-denominated RTS index was down 0.9 percent to 997.1 points, while the rouble-based MICEX was 0.13 percent lower at 1,923.2.

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