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Russian rouble firms past 62 vs dollar as tax payments loom -Breaking


© Reuters. FILEPHOTO: This picture illustrates Russian Ruble Banknotes with various denominations at a Warsaw, Poland table on January 22, 2016. REUTERS/Kacper Pempel/File Photo

(Reuters] – On Thursday the Russian rouble surpassed 62 against USD. The gains were attributed to both capital controls and looming tax payments. These usually involve extra currency conversion to roubles for local obligations.

Despite a severe economic crisis in the country, this currency has performed well. It was artificially supported with controls Russia implemented late February to safeguard its financial sector.

The rouble rose more than 2 percent to 62.008 USD on the Moscow Exchange at 1320 GMT. It briefly touched 61.72 in the short time between its lowest point since the beginning of 2020.

After a brief move to 61.1075 during the opening market, the rouble strengthened more than 3 percent to 64.46. This was most likely due to trading errors and the rouble reached its strongest point since April 2017.

Anton Strouchenevsky (chief economist, SberCIB Investment research) stated that “because commodity prices are still high, the Russian rouble could continue to firm at 60 (to the dollars)”

The rouble will likely stabilize above 70 to the dollar as the imports have stabilised in the third quarter.

The requirement that export-focused businesses convert 80% to their profits is what steers the rouble. However, capital controls and the drop in demand for euro and dollar are limiting the supply of dollars and euros.

Ten-year OFZ Treasury Bond Yields fell from 10.30% to 10.24% earlier this week.

As the central bank plans to reduce its key rate in the year ahead to support the economy, and inflation slows down due to the firming of the rouble, yields will move in the opposite direction to bond prices.

Dmitry Polevoy from LockoInvest said that the central bank would likely cut its key interest rate by 100-200 base points, or 14%, at its next board meeting.

The annual inflation rate slowed to 17.69% on May 13, from 17.77% one week prior. Meanwhile, the weekly reading of inflation dropped to 0.12%. This is well below the 2.22% read in March, when Russia launched what it called “a special military operations” in Ukraine.

Mixed stock indexes. At 1,232.7 points, the dollar-denominated RTS Index was 1.7% more. MOEX Russian, which is based on roubles, lost 0.6% to 2,430.0 point.

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