MOSCOW
Russia’s rouble strengthened early on Tuesday, bouncing back after taking a sharp hit late on Monday, when ratings agency S&P downgraded Russia’s sovereign credit rating to ‘junk’.
The rouble was seen supported by Russian companies selling foreign currency, which they have been doing at regular intervals after the government pressured them to do so to ease pressure on the rouble.
At 0740 GMT, the rouble was around 1.3 per cent stronger against the dollar at 67.90 and gained 1.1 per cent to trade at 76.40 versus the euro.
Russian shares, however, opened lower, since Russia’s stock market was closed when S&P made its announcement and therefore had not priced in the news.
Analysts said that while the downgrade was a clear negative for Russian assets, it was largely expected and had been priced in by many market participants.
S&P cut Russia’s rating from BBB- to BB+, citing Russia’s weakened economic growth prospects, hit by low oil prices and Western sanctions over the Ukraine crisis.
The downgrade leaves Russia in so-called ‘junk’ territory for the first time in a decade, which could push up its borrowing costs as many mainstream investment and pension funds have rules preventing them from buying anything not classed as investment grade.
The rouble weakened sharply after the decision, ending Monday’s session over 6 percent lower than the previous close against the dollar at 68.79 roubles per dollar.
On Tuesday, bond yields rose on the benchmark 2030 Eurobond rose by around 13 basis points to 7.42 per cent.
Global oil prices were little changed, with Brent crude futures trading around $48 (Dh176) a barrel. Oil is one of Russia’s chief exports.
