Russian ruble jumps to a high of nearly seven years against the euro

The Russian ruble rose more than 6% against the euro on Monday, hitting a high of nearly seven years. This was boosted by capital controls, high oil prices, and the tax period at the end of the next month.

By 1338 GMT, the ruble had risen 6.3% and traded at 58.75 against the euro. This is the strongest point since early June 2015.

It was 4.6 percent stronger against the dollar at 57.47, not far from the strongest mark since late March 2018, which was a hit on Friday, 57.0750.

The ruble remains strong by about 30% against the dollar this year despite a full-scale economic crisis in Russia, to protect Russia’s financial sector after deciding to send tens of thousands of troops. It was artificially supported by the regulations imposed in late February. The invasion of Ukraine prompted unprecedented western sanctions.

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

Although the central bank and government remain regulated, the ruble could be further strengthened in the medium term, Tinkoff Investments analysts said.

“As we approach autumn, exchange rates may begin to stabilize near the 60-65 level, as imports may recover and deregulations may be lifted.”

According to analysts at Otkritie Bank, the ruble will fall to $ 55 within a month and could fall to $ 70-80 by the end of the year.

Russia’s demand for foreign buyers to pay gas in the ruble has also contributed to the ruble’s recent backlash, analysts said.

Foreign currency supply from exporters, high oil prices, and all taxation periods at the end of the next month that encourage export-focused companies to convert foreign exchange revenues into rubles to meet local debt are all in Russia BCS Express said in a memo that it supports the currency.

Central bank intervention?

Vedomosti reported daily on Monday, citing sources, that the central bank had begun buying foreign currencies to thwart the uncontrolled strengthening of the ruble.

The central bank denied the report, stating that “this information does not correspond to reality.”

If the central bank is implementing such an intervention, the impact on the ruble rate will be more pronounced, Promsvyazbank analysts said.

“Nevertheless, such news can affect the behavior of market participants and cause the ruble to weaken.”

Russia’s stock index was mixed.

The dollar-denominated RTS index rose 2.2% to 1,266.8 points. The ruble-based MOEX Russia index was down 2.6% to 2,311.2 points.