Rouble reverses steep early losses in volatile trade

MOSCOW, March 19 (Reuters) - The Russian rouble sank to a fresh four-year low on Thursday before reversing course to trade higher, as the currency was buffeted by volatility in global markets and oil prices due to risks posed by the coronavirus pandemic.

At 0809 GMT, the rouble was 1.5% stronger against the dollar at 79.64, having earlier touched 81.97, its lowest since January 2016. The rouble had plunged more than 7% against the dollar in the previous session.

The rouble had gained 2.4% to trade at 86.20 versus the euro .

Brent crude oil, a global benchmark for Russia’s main export, was up 6.1% at $26.4 a barrel, after sliding to its lowest since May 2003 on Wednesday.

Russian markets dived on Wednesday, with the dollar-rouble pair reaching its upper limit for trading on the Moscow Exchange, meaning that players could only make bets on the rise of the dollar, not its fall, artificially limiting losses for the rouble.

On Thursday, the finance ministry said it had begun operations to sell foreign currency as part of the purchase of a stake in state lender Sberbank, which could provide domestic support for the rouble.

Russia’s central bank began selling foreign currency last week, its first such intervention in five years, and on Thursday the bank said the forex sales related to the Sberbank deal would only be carried out if the price of Urals oil is lower than $25 dollars a barrel.

As of March 19, Urals crude oil cargoes loading from Russia’s Baltic ports were at $18.6 per barrel.

Analysts polled by Reuters unanimously expect the central bank to hold the key rate at 6.00% at its board meeting on Friday, but growing inflationary risks and volatile markets could lead the bank to take special measures.

“The circumstances are unprecedented, and the Russian central bank can justify either a cut or a hike depending on the weight it attaches to inflation and growth risks,” said Alina Slyusarchuk, economist at Morgan Stanley.

Analysts at Gazprombank said a rate hike would be an extreme measure given that the bank has already taken measures to buttress the currency, including a 30-day moratorium on daily purchases of foreign currency and its forex sales.

In a bid to inject liquidity into the banking sector, the central bank said on Thursday that it would hold a repo auction for 500 billion roubles ($6.3 billion) after having carried out such an auction last week.

Russian stock indexes were higher.

The dollar-denominated RTS index was up 2.6% to 854.4 points. The rouble-based MOEX Russian index was 2.3% higher at 2,157.3 points.

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$1 = 79.8110 roubles Reporting by Alexander Marrow, additional reporting by Gabrielle Tétrault-Farber; Editing by Amy Caren Daniel