Russian rouble ticks up in thin volumes, outlook bleak

(Reuters) – The rouble ticked up in both Moscow and international FX markets on Thursday after the first formal talks between Russia and Ukraine’s foreign ministers, even though the meeting made no progress on a ceasefire.

The currency has lost as much as 50% of its value to the dollar this year, crippled by international sanctions after Russia’s invasion of Ukraine last month.

The rouble closed at 118.5 per dollar in Moscow or up 1.3% from the close on Wednesday, still down 36.5% from mid February. It hit a record intraday low of 121.5275 on the Moscow Exchange used by major Russian banks.

Against the euro the rouble closed at 125 in Moscow, up 1.6% for the session, after hitting a record intraday low of 132.4175. It is down 32.4% year to date.

In international markets bids were indicated at 127.75 to the dollar and 140.4 to the euro, slightly stronger on the day.

“We’ve had a bit of a reversal today, but that needs to be put in the context of everything going on and volumes are so much lighter that we don’t read too much into that,” said Christian Lawrence, senior market strategist at Rabobank.

The local stock market remains shut, as does bond trading.

Talks in Turkey on Thursday between top Ukrainian and Russian diplomats Dmytro Kuleba and Sergei Lavrov yielded little progress.

Kuleba said there had been no promise of a ceasefire to allow aid to reach civilians while Lavrov accused the West of inflaming the situation by providing weapons to Ukraine.

The impact of economic sanctions on Russia has weighed heavily on the value of Russian assets in global financial markets.

“There is a pretty wide spread between (Moscow Exchange) pricing and what you would see in the West, so that gives you very little confidence about the level,” TD Securities’ Head of Emerging Markets Strategy Cristian Maggio said.

There were also more global sanctions and restrictions on Thursday.

Britain imposed sanctions on another list of wealthy Russians including Chelsea Football Club owner Roman Abramovich, while the Bank for International Settlements – the main global central bank umbrella group – suspended Russia’s central bank from all its meetings and services.

Markets are also keeping a close eye on debt repayments due, with the looming spectre of Russia defaulting on $40 billion of external bonds. It would be its first major such default since the years following the 1917 Bolshevik revolution.

Finance Minister Anton Siluanov said Russia will service its external obligations in roubles if foreign exchange accounts of the central bank and the government remain blocked by the western sanctions, according to Russia’s TASS news agency.

But 5-year credit default swaps, the cost to insure exposure to Russia’s sovereign debt, touched a record high of 3,176 basis points.

IFR reported that Russian state-owned oil company Rosneft paid back a bond in U.S. dollars on Wednesday while Norilsk Nickel, the world’s biggest nickel and palladium producer, also made a payment on a U.S. dollar bond, according to sources.

Moscow must make $107 million in coupon payments on two hard-currency sovereign bonds on March 16.

(Reporting by Reuters; Editing by Andrew Heavens and Chizu Nomiyama)