January 15, 2015 / 9:01 AM / 4 years ago

RPT-UPDATE 2-Russian rouble firms as oil rallies, Kremlin ups verbal support

(Repeats to wider addresses)

By Alexander Winning and Darya Korsunskaya

MOSCOW, Jan 15 (Reuters) - The rouble firmed on Thursday, tracking the performance of global oil prices, with investors remaining nervous, however, at the prospect of Russia’s sovereign debt being downgraded to ‘junk’ status.

At 1440 GMT the rouble was around 0.4 percent stronger at 64.47 to the dollar, and was also 1.4 percent firmer against the euro at 75.21.

The rouble often takes its lead from prices for oil, one of Russia’s chief exports, and crude rallied on dollar weakness. Brent traded above $50 per barrel, up more than $1.50 on the day.

Analysts at VTB24 Bank said, however, that the rouble would have to firm about 2 percent against the dollar before there could be any prospect of reversing its slide.

“Looking at the appreciation of the national currency today, it should be understood that, even in the medium term, nothing changes yet,” they said in a note.

The Kremlin put a positive spin on the rouble on Thursday, with President Vladimir Putin’s top economic aide Andrei Belousov saying it had entered a “zone of stabilisation”.

“I think all basic conditions for a trend reversal have been formed,” Belousov said.

However, Standard & Poor’s impending review of Russia’s sovereign credit ratings, due within days, continued to weigh on the rouble.

S&P currently rates Russia’s debt at just one notch above ‘junk’ status with a negative outlook, and Russia’s economy minister has said the likelihood of a downgrade is “pretty high”.

Belousov said possible actions by rating agencies might result in a period of uncertainty, “but my feeling is that the market has already assessed possible changes and priced them in, and nothing much serious should happen”.

Analysts note, however, that a downgrade to ‘junk’ status can not only harm a country’s image for investors, but also push up its borrowing costs, as many mainstream investment and pension funds have rules preventing them from buying anything not classed as investment grade.

Russia’s central bank said on Thursday it had sold $650 million worth of foreign currency on Jan. 13 on behalf of the Finance Ministry.

The central bank replaced its head of monetary policy on Wednesday, amid criticism over its defence of the rouble, which fell more than 40 percent last year, weighed down by the sharp drop in oil prices and Western sanctions over the Ukraine crisis . (Writing by Alexander Winning and Lidia Kelly; Editing by Kevin Liffey)

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