In this image dated March 1, 2022, a Russian ruble banknote is placed on top of euro banknotes. REUTERS/Dado Ruvic/Illustration/File Photo
- Russia’s ruble nears a 7-year high against the euro
- Currency backed by capital controls
- Reaches 58.68 against the Euro and gains over 4% against the Dollar
May 23 – The Russian ruble strengthened more than 6% against the euro on Monday to a nearly seven-year high, buoyed by capital controls, strong oil prices and an upcoming month-end tax period.
By 1338 GMT, the ruble was up 6.3% to trade at 58.75 against the euro, its strongest since early June 2015.
It was 4.6% stronger against the dollar at 57.47, not far from 57.0750, its strongest level since late March 2018 hit on Friday.
The ruble has strengthened about 30% against the dollar this year despite a wide-ranging economic crisis in Russia, making it the world’s best-performing currency – albeit artificially helped by controls imposed in late February to curb Russia’s financial sector following its decision Sending tens of thousands of troops into Ukraine triggered unprecedented Western sanctions.
The ruble is being propelled by export-oriented companies that are required to convert their foreign exchange earnings after sanctions froze nearly half of Russia’s gold and foreign exchange reserves.
While the central bank and government maintain restrictions, the ruble could continue to appreciate in the medium term, analysts at Tinkoff Investments said.
“Closer to autumn, the exchange rate could stabilize closer to the 60-65 level as imports recover and restrictions may be lifted.”
Analysts at Otkritie Bank said the ruble could firm to 55 against the dollar within a month before weakening to 70-80 by year-end.
Russian demands that foreign buyers pay for gas in rubles have also contributed to the ruble’s recent rally, analysts said last week. Continue reading
The supply of foreign exchange from exporters, high oil prices and an upcoming month-end tax period that usually prompts export-oriented companies to convert their foreign exchange earnings into rubles to pay off local liabilities are supporting the Russian currency, BCS Express said in a statement.
CENTRAL BANK INTERVENTIONS?
Citing sources, daily Vedomosti reported on Monday that the central bank had started buying up foreign exchange to halt the ruble’s uncontrolled appreciation.
The central bank denied the report, saying “this information does not correspond to reality”.
If the central bank were to make such interventions, the impact on the ruble exchange rate would be more noticeable, Promsvyazbank analysts said.
“Nevertheless, such news could affect the behavior of market participants and provoke a weakening of the ruble.”
Russian stock indices were mixed.
The dollar-denominated RTS index (.IRTS) rose 2.2% to 1,266.8 points. The ruble-based Russian MOEX Index (.IMOEX) was down 2.6% to 2,311.2.
Reporting by Reuters Editors by William Maclean, Mark Potter and Toby Chopra