Rouble slides again as Putin says Belarus asked for help
The Russian rouble pared earlier gains and weakened towards its lowest since April against the dollar on Thursday after President Vladimir Putin said Belarusian leader Alexander Lukashenko had asked him to set up a reserve police force.
Putin said, however, Russia had no plans to use this force unless the crisis in neighbouring Belarus got out of control. The rouble tumbled this week as concern grew that Moscow's ties with the West may deteriorate if it intervenes in the crisis in neighbouring Belarus.
Traders also braced for fallout from an opposition leader's alleged poisoning and the U.S. monetary outlook. Putin in a televised interview on Thursday may touch upon more hot topics in August that caused the rouble to crash despite a relatively positive global background and higher oil prices. At 1110 GMT, the rouble was 0.1% weaker against the dollar at 75.43, heading back to 76.0025 reached on Wednesday, its weakest since
April. Versus the euro, the rouble gained 0.3% to trade at 88.95, up from Wednesday's low of 89.8050, a level last seen in February 2016.
It had been as strong as 70 per euro in early 2020. Adding to the pressure on the rouble and fuelling concerns about more sanctions, the Kremlin has also declined for now to investigate the circumstances surrounding the sudden illness of opposition politician Alexei Navalny, which German doctors said could be from poisoning. "It is worth noting that, despite making political noises, western countries have not really imposed sanctions on Russia for persecution of domestic Kremlin critics," said Tatha Ghose at Commerzbank in London.
"While some caution may be prudent when it comes to the rouble, the basecase assumption is that the risk spike will fade in coming months, with the higher oil price then having a positive impact on the exchange rate." The market focus is expected to shift to Fed Chair Jerome Powell's address to the virtual Jackson Hole summit at 1310 GMT, when he is to present the Fed's monetary policy outlook.
On the stock market, the dollar-denominated RTS index fell 0.8% to 1,263.5 points but the rouble-based MOEX Russian index slid 0.9% to 3,025.5 points. "Russian stocks are expected to come under pressure today due to geopolitical tensions, and investors are likely to hug the sidelines ahead of Jerome Powell"s speech on Fed strategy," Alfa Bank said.
The US dollar remained near the one-week low it reached earlier on Thursday, before a speech by Federal Reserve Chairman Jerome Powell that's expected to signal the central bank will tweak its policy framework to help push up inflation. Powell is scheduled to address the Fed's annual central bankers' conference at 1330 GMT, usually held in Jackson Hole, Wyoming, but being conducted virtually this year because of the COVID-19 pandemic.
The changes are likely to mean that Fed will base its future monetary policy on realised rather than projected inflation data while explicitly accepting an overshoot in inflation.