(Reuters) – The Russian rouble strengthened to 78 dollars in the early trading hours on Wednesday. Stock indexes suffered losses due to developments surrounding Ukraine and Russian sanctions.

Russia now faces high inflation and capital flight, while struggling with debt default following harsh sanctions imposed by West for Moscow’s February 24th invasion of Ukraine.

At 0729 GMT the currency gained 0.5% and was at 78.15 USD. It is now close to its levels of February 24th.

In comparison to the euro, 0.3% was added to the rouble at 83.83. It is now away from its record-breaking low of 132.41, which the Moscow Exchange recorded on March 10.

Capital controls imposed by Russia in February have artificially restricted movements in the ruble.

The central bank relaxed some capital controls on export-focused businesses that are not in the energy or commodities sectors. It extended the deadline for them to convert foreign currency into roubles from the previous three days to sixty days.

Promsvyazbank analysts stated in a note that although market activity could be affected by the central bank’s move, excessive foreign exchange supply will not change and the rouble may strengthen beyond 78 dollars.

According to Reuters analysts, the rouble could also benefit from tax payments. Companies will have to pay a record $3 trillion roubles (or 37.40 billion dollars) this month. Some export-oriented companies must sell foreign currency to cover these taxes.

Russian stock indexes declined due to lack of positive news or trading ideas.

RTS, a dollar-denominated index, fell 1.2% and dropped to 920.2 point. At 2,283.2, the MOEX Russian index on rouble was 1.5% less.

For Russian equities guide see

Russian Treasury Bonds

($1 = 80.2040 roubles)