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UPDATE 1-Rouble at 7-mth low vs euro, hit by local FX buying

Published 09/22/2010, 03:46 AM
Updated 09/22/2010, 03:48 AM
EUR/RUB
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* Rouble falls to 7-mth low vs euro of 41.34

* Slightly up vs broadly weaker dollar

* Pressured by lingering demand for foreign currencies

* Dealers bargain on end-month taxes

MOSCOW, Sept 22 (Reuters) - The rouble fell to a seven-month low against the euro in early trade on Wednesday but was slightly up against the dollar, pricing in a broad slide in the greenback on expectations of more easing measures in the U.S.

By 0655 GMT, the rouble slumped 58 kopecks, or 1.4 percent to 41.34 against the euro , its weakest point since Feb. 10, according to Reuters data. The euro stopped just before 41.38, the 50 percent Fibonacci retracement of the rouble's upside move from lows of Dec 2009 to May 2010 peaks.

The latest fall takes the rouble's losses versus the euro this month to over 5 percent, compounded by worries about the health of the economy, a falling current account surplus and hefty redemptions of foreign currency corporate debts.

The Russian currency is still up 5.3 percent against the euro since the start of the year, however.

Reflecting broad weakness in the dollar <.DXY>, the rouble inched up 7 kopecks, or 0.2 percent to 30.99 on Wednesday.

"All commodity currencies firmed against the dollar. But we see ongoing buying of foreign currencies on the market, that's why the basket is rising," said Artyom Gavrilov, chief dealer at Nomos bank.

Against the euro-dollar basket, the rouble weakened 17 kopecks, or nearly 0.5 percent to 35.6 , closing in on last week's multi-month minimum of 35.72.

The demand for foreign currencies in Russia is linked to debt redemptions and deterioration of the current account surplus due to rising imports, analysts say.

According to the latest Federal Customs Service data, in the first eight months of this year Russia's imports rose nearly 35 percent compared to the same period of 2009 and jumped 62 percent year-on-year in August alone.

Oil prices [O/R] remained supportive for the rouble, with Brent futures hovering above $78.5 per barrel.

The central bank tends to curb rouble losses by intervening on the MICEX exchange and selling some $150-200 million a day when the rouble falls to levels below 35.30 against the basket, dealers say.

"Current levels of the basket seem to be too high, such a rise in the basket may be short-lived, as it is caused by temporary imbalance," said Gavrilov at Nomos.

The rouble is seen unlikely to firm until Russian export-focused companies eventually increase conversions of their dollar and euro revenues to meet quarter- and month-end taxes next week.

Exporters are likely to step up selling of foreign currencies closer to the weekend, said Anton Zakharov, analyst at Promsvyazbank.

"It looks like the market is playing a waiting game, looking for fresh ideas and a direction," he said. (Reporting by Andrey Ostroukh; Editing by Catherine Bremer)

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