Russian Ruble Leaps to Near 7-year High vs Euro

A Russian ruble banknote is placed on euro banknotes in an illustration taken on March 1, 2022. Dado Ruvic/Illustration/Reuters

The Russian ruble firmed more than 6 percent against the euro on Monday to a near seven-year high, boosted by capital controls, strong oil prices, and an upcoming month-end tax period.

By 1338 GMT, the ruble had gained 6.3 percent to trade at 58.75 versus the euro, its strongest point since early June 2015.

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

The ruble has firmed about 30 percent against the dollar this year despite a full-scale economic crisis in Russia, making it the—albeit artificially supported by controls imposed in late February to shield Russia’s financial sector after its decision to send tens of thousands of troops into Ukraine prompted unprecedented Western sanctions.

The ruble is being driven by export-focused companies that are obliged to convert their foreign currency revenue after the sanctions froze nearly half of Russia’s gold and forex reserves.

While the central bank and government leave restrictions in place, the ruble could continue to strengthen further in the medium term, said Tinkoff Investments analysts.

“Closer to autumn, the exchange rate may start to stabilise nearer to the 60–65 level as imports recover and restrictions are potentially lifted.”

Otkritie Bank analysts said the ruble may firm to 55 to the dollar within a month before weakening to 70–80 by year-end.

Russian demands that foreign buyers pay for gas in rubles has also contributed to the ruble’s recent rally, analysts said last week.

The supply of foreign currency from exporters, high oil prices and an upcoming month-end tax period that usually prompts export-focused companies to convert their forex revenues into rubles to meet local liabilities are all supporting the Russian currency, said BCS Express in a note.

Central Bank Interventions?

The Vedomosti daily reported on Monday, citing sources, that the central bank had started purchasing foreign currency in order to stop the ruble’s uncontrolled strengthening.

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

If the central bank were carrying out such interventions, the effect on the ruble rate would be more noticeable, said Promsvyazbank analysts.

“Nevertheless, such news could influence the behavior of market participants and provoke a weakening of the ruble.”

Russian stock indexes were mixed.

The dollar-denominated RTS index was up 2.2 percent to 1,266.8 points. The ruble-based MOEX Russian index was 2.6 percent lower at 2,311.2 points.