By Alexander Marrow
Jan 31 (Reuters) – The rouble recovered from hitting a more than three-week low near 71 against the dollar on Tuesday, as the Russian currency traded after a favourable month-end tax period and foreign currency interventions offered only limited support.
By 1518 GMT, the rouble was 0.7% stronger against the dollar at 69.95, after hitting 70.83 in early trade, its weakest level since Jan. 9.
It had gained 1.1% to trade at 75.74 versus the euro and had firmed 0.7% against the yuan to 10.34 .
With payments made on Jan. 30, the rouble has now lost support from month-end taxes, when exporters convert foreign exchange revenue to pay local liabilities.
The rouble does have the support of foreign currency sales by the government, which is offloading up to 3.2 billion roubles ($45.45 million) worth of Chinese yuan per day, but analysts have said their impact on the rouble is limited.
Moscow has made efforts to “dedollarise” its economy in recent months, turning away from currencies it considers “unfriendly”, but switching certain operations to yuan is proving difficult, according to bankers.
“There are technical difficulties in terms of developing payments in this currency,” said Alexander Rakhmanin, vice president of Rosbank’s financial institutions department. “The Chinese banking system is highly dependent on SWIFT.”
Western sanctions have blocked many Russian banks from access to the SWIFT global payments system.
While the dollar’s share in foreign trade turnover is decreasing and the yuan’s rising, fully abandoning the U.S. currency still seems some way off, Rakhmanin said.
“The dollar remains the main reserve and trading currency, even in turnover with friendly currencies,” he said.
The rouble has been under external pressure since a Western price cap on Russia’s oil sales came into force in early December alongside a European Union embargo on buying sea-borne Russian oil, forcing Moscow to sell at a discount.
Brent crude oil, the global benchmark for Russia’s main export, was down 0.5% at $84.5 a barrel.
Russian stock indexes were higher.
“Russian equity futures are pointing slightly higher but gains will be capped amid continued pressure on commodity prices,” said John Walsh, equity strategist at Alfa Bank.
The dollar-denominated RTS index was up 1.4% to 1,001.5 points. The rouble-based MOEX Russian index was 0.8% higher at 2,222.2 points.
Moscow-listed depositary receipts in retailer O’Key Group were down 3.6% after the company said it expects its chain of discount stores to soon account for half of its overall revenue as shoppers increasingly seek cheaper goods amid economic contraction and high inflation. ($1 = 70.4000 roubles) (Reporting by Alexander Marrow and Elena Fabrichnaya; editing by Jason Neely, Bernadette Baum and Jonathan Oatis)