Russian rubles rally against the dollar at the level of March 2018

ryanniesMay 20, 2022

The Russian ruble rose more than 7% against the dollar on Friday, reaching the level last seen in March 2018. This was boosted by capital controls and domestic taxes, which usually lead to increased demand for currencies.

Despite the full-scale economic crisis, the ruble has solidified by nearly 30% so far this year and has become the best performing currency http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES- PERFORMANCE / 0100301V041 / index .html is artificially supported by controls imposed in late February to protect Russia’s financial sector after sending tens of thousands of troops to Ukraine.

At 0807 Greenwich Mean Time, the ruble was 58.90 against the dollar in a volatile transaction on the Moscow Stock Exchange after reaching 57.0750. This is the last level seen in late March 2018.

Against the euro, the ruble rose more than 5% to 60.86 after hitting the highest since June 2015 at 59.02.

The ruble is being promoted by export-centric companies that are obliged to convert foreign currency revenues after Western sanctions freeze almost half of Russia’s gold and foreign exchange reserves.

“Exporters are forced to sell (foreign currency) and no one buys it,” said a trader at an investment company in Moscow.

Month-end tax reserves also boost ruble demand, but dollar and euro demand remains low due to import chain disruptions, foreign currency withdrawals from bank accounts and restrictions on movement from Russia.

“The key question is whether the central bank will intervene because excessive ruble tightening is not included in the Treasury and budget plans,” said Evgeny Suvorov, an analyst at CentroCredit Bank.

Kirill Tremasov, head of the central bank’s monetary policy division, said on Friday that the ruble remained floating, the RIA news agency reported.

The central bank refused to comment on the ruble rate.

Inflation brake

Outside the Moscow Stock Exchange, the ruble remained much weaker. Russia’s largest creditor, Sberbank, sold cash dollars at 67.17 rubles and euros at 69.84 rubles.

Stronger rubles help put a brake on inflation and are beneficial to importers, but hurt exporters who sell goods and services abroad in foreign currencies. In other words, the income of Russia’s export-dependent budget will decrease.

Analysts say Russian officials are not interested in significantly strengthening the ruble from current levels and expect the currency to depreciate by the end of the year.

As a sign that authorities are gradually preparing to lift capital restrictions, the central bank has allowed banks to sell foreign currency to citizens without restrictions from May 20, except for the US dollar and the euro.

On the other hand, Russia’s stock index on Friday was mixed.

The dollar-denominated RTS index rose 4.8% to 1,305.9 points. The ruble-based MOEX Russia index was down 1.3% to 2,405.7 points under pressure from the high ruble. (Report by Reuters, edited by Tomasz Yanovsky and Alexander Smith)