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Rouble rebounds after oil strengthens
From the Financial Times of Mon, 22 Dec 2014 17:56:55 GMT

Russia’s currency rebounded after an early boost to oil prices ensured the rouble was the best performing emerging market currency against the dollar in spite of a later dip in the market.

The rouble rose 6 per cent against the US currency to trade at 56 roubles, having earlier come close to 54 roubles to the dollar, its strongest level in 12 days.

Currency analysts warned, however, that pockets of strength in the Russian currency were likely to be shortlived as the outlook for the US dollar remained firm and oil prices remained vulnerable.

“The rouble is far from out of the woods yet,” said analysts at Citigroup’s foreign exchange news service.

Others said that, while further fluctuations in the price of oil would weigh on Russia’s currency, they were not expecting fresh volatility on the scale seen this month after the Russian central bank raised interest rates 650 basis points, which failed to avert a sharp drop in the value of the rouble.

Since hitting a record low at close to 80 roubles a dollar less than a week ago, the rouble has clawed back nearly a third of its value against the dollar as emergency measures by the Russian government have restored a level of confidence.

“While we certainly think the rouble could come under renewed pressure as a result [of a fall in oil prices], we also suspect that the height of the crisis for the currency has already passed,” said analysts at BNY Mellon.

Other commodity currencies showed a smaller reaction to the moves in the oil price on Monday. The South African rand was up 0.4 per cent against the dollar at 11.53 rand. Brazil’s real was up 0.2 per cent at 2.65 real while the Chilean peso was up 0.3 per cent at 609.5 pesos.

Commodity currencies among developed markets also moved in a relatively limited range against the dollar as traders and analysts reported a quiet market in the run-up to the holiday period.

The Canadian dollar was down 0.3 per cent at $1.164 while the New Zealand dollar was down 0.3 per cent at $0.774. The Norwegian krone lost 0.5 per cent to trade at NKr7.4 against the US currency, while the Australian dollar was up 0.1 per cent at $0.814.

The dollar was flat overall against its major trading partners but remained close to a fresh eight-year high reached the previous day, with the dollar index trading just over 89.6.

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