The ruble weakens sharply after hitting a more than 2-year high against the euro ahead of the long weekend

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Russian ruble coins are seen in front of the colors of the Ukrainian and Russian flags in this illustration taken February 24, 2022. REUTERS/Dado Ruvic/Illustration/Files

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May 6 (Reuters) – The Russian ruble fell sharply on Friday, falling back from a more than two-year high against the euro as the specter of new sanctions against Moscow loomed over markets ahead of a second long weekend consecutive vacation.

The European Union executive on Wednesday proposed the toughest set of sanctions yet against Russia for its actions in Ukraine, but concerns from several countries over the impact of halting Russian oil imports obstructed an agreement. Read more

As of 12:01 GMT, the ruble was down 4.7% to trade at 73.45 against the euro, falling sharply from its strongest point since February 2020 of 69.1250.

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The ruble weakened 3.8% against the dollar to 69.52, not too far from a more than two-year high of 65.3125 hit on Thursday.

The ruble has rallied over the past few weeks thanks to mandatory foreign currency conversion by export-oriented companies. Additionally, demand for dollars and euros was weak amid falling imports and restrictions on cross-border transactions.

“It looks like the ruble has found a new balance point around 67, at least for now,” Sberbank CIB analysts said in a note. “However, we think the local currency could begin to strengthen again when we exit the May holiday next week as exporters gradually start to step up their hard currency offerings.”

They said the ruble could strengthen to 60 against the greenback by the end of the month.

Yuri Popov of SberCIB Investment Research expects the ruble to trade at 75 to the dollar by the end of the year, improving on his April 85 forecast.

Ruble moves are sharper than usual as market liquidity was reduced by central bank restrictions designed to support financial stability after Russia sent tens of thousands of troops to Ukraine on Feb. 24.

Meanwhile, trading activity is subdued as markets are only open for three days this week amid Russia’s long May holiday.

Brent crude, a global benchmark for Russia’s top export, rose 1.7% to $112.8 a barrel.

Russian stock indices were down.

The dollar-denominated RTS index (.IRTS) fell 3.7% to 1,078.1 points. Russia’s ruble-based MOEX index (.IMOEX) fell 1% to 2,381.6 points.

Analysts at Promsvyazbank said they expect stock markets to fall ahead of another long holiday weekend.

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Reporting by Reuters Editing by Frank Jack Daniel, Mark Potter and Chizu Nomiyama

Our standards: The Thomson Reuters Trust Principles.

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