Rouble weakens as Ukraine, Russia-backed rebels trade shelling accusations

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FILE PHOTO: Vendors count Russian rouble banknotes at a market in Omsk

By Alexander Marrow and Katya Golubkova

MOSCOW – The Russian rouble and stocks slipped in volatile trade on Thursday after Russian-backed rebels and Ukrainian forces traded accusations of firing shells across the ceasefire line in eastern Ukraine, sending market players running for cover.

Kyiv said the incidents in eastern Ukraine looked like a “provocation” at a time when Russia has troops massed on the frontier.

Russia, which denies any plans to invade, on Thursday rejected what it called “unfounded accusations” by the United States and NATO that it was not withdrawing its forces from near the border, saying it takes time to wind down military exercises.

By 1345 GMT, the rouble was 1.2% weaker against the dollar at 76.15 , moving further away from 75 touched in the previous session and earlier falling as far as to 76.7175 in volatile trade.

The unit had weakened 0.9% to trade at 86.47 versus the euro.

“The jury is out as to whether the threat of invasion has de-escalated, unsettling risk appetite,” said BCS Global Markets in a note.

The rouble had been recovering this week after its sharpest single-session drop in nearly two years on Friday, caused by Western nations’ calls to their citizens to leave Ukraine.

The reports of shelling saw most of those gains evaporate and both Russia’s and Ukraine’s sovereign dollar bonds suffered fresh falls on Thursday, though Russian assets managed to pare some losses later in the session.

Five-year credit default swaps for Russia – a measure of the cost of insuring exposure to the country’s debt – jumped by around 13 basis points from Wednesday’s close to 227 bps, though that was still some way off the more than 270 bps hit on Monday, data from IHS Markit showed.

The West has threatened tough sanctions should Russia invade, something Moscow has repeatedly denied planning.

For NATO members, the most powerful measure against Russia would be U.S. sanctions cutting off Russian state banks from the dollar, according to Russian executives, bankers, and former senior U.S. sanctions officials.

Brent crude oil, a global benchmark for Russia’s main export, was down 1% at $93.83 barrel.

The dollar-denominated RTS index was down 4.1% to 1,462.0 points. The rouble-based MOEX Russian index was 3.1% lower at 3,532.1 points.

(Reporting by Alexander Marrow and Katya Golubkova; additional reporting by Karin Strohecker in London; Editing by Sherry Jacob-Phillips, Rashmi Aich and Maju Samuel)

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