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Russian rouble continues retreat as low oil price weighs

Russian rouble continues retreat as low oil price weighsMOSCOW: The Russian rouble fell further against the dollar on Friday, retreating for a third day as international oil prices hovered close to three-and-a-half-month lows.

At 0830 GMT, the rouble was 0.4 percent weaker against the dollar at 58.10 and had gained 0.1 percent to 63.52 versus the euro.

The rouble has shed around 2 percent against the dollar since Wednesday as a result of declines in the Brent oil price, which has returned to levels around $ 55 per barrel last seen in early April.

Brent was down slightly at $ 55.2 per barrel on Friday, after weak PMI manufacturing data from China reinforced fears about the impact of a Chinese slowdown on commodity prices.

The concerns about the oil price have outweighed demand for forex to pay monthly taxes, which had been expected to support the rouble this week.

“Despite the start of the tax period, for the rouble every day is getting worse and worse,” PROFIT Group analyst Gleb Zadoya said in a note.

“Oil prices give our currency practically no chances for recovery and if in the coming days oil prices don’t attempt to recover, the rouble has every chance of continuing to fall.”

VTB24 analyst Stanislav Kleshchev said in a note that the rouble would be impacted on Friday by an expected announcement about whether the government will index pensions in 2016-18.

“The authorities have a choice – either to index payments by actual inflation, fulfilling social obligations, or to limit indexation to planned inflation, maintaining budget balance,” he said.

“If social obligations are made the priority, it will exert negative pressure on the exchange rate.” Russian share indexes also continued to fall on Friday, dragged lower by the oil price and poor Chinese data.

The dollar-based RTS index was down 1.4 percent to 872 points while the rouble-based MICEX fell 0.5 percent to 1,608 points.

Copyright Reuters, 2015

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