November 30, 2022

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The ruble heads away from 50 against the dollar as authorities point to interventions

The ruble heads away from 50 against the dollar as authorities point to interventions

Illustrative image showing Russian ruble banknotes of different denominations on a table in Warsaw, Poland, January 22, 2016. REUTERS/Kacper Pempel

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  • This content was produced in Russia where coverage of Russian military operations in Ukraine is restricted by law

MOSCOW (Reuters) – The ruble pared gains in volatile trade on Wednesday as Russia’s finance minister announced potential interventions to ease upward pressure on the currency after it approached 50 against the dollar for the first time since May 2015.

The ruble became the world’s best-performing currency this year, buoyed by measures — including restrictions on Russian households withdrawing foreign currency savings — taken to protect the Russian financial system from Western sanctions imposed after Moscow sent troops into Ukraine on February 24.

The strong ruble has alarmed officials and export-focused companies because it dilutes Russian income from selling goods and other goods abroad against dollars and euros.

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Evgeny Suvorov, an economist at CentroCreditBank, said many Russian companies, especially oil and gas exporters, are already struggling financially.

Finance Minister Anton Siluanov said that Russia may cut government spending and direct money to foreign exchange interventions to curb the strengthening of the ruble that threatens budget revenues. Read more

The ruble pared its gains after the comment and was 0.4% weaker today at 52.00 per dollar at 1154 GMT after hitting 50.01.

Revenues from exports of goods, a sharp decline in imports, and tax payments at the end of the month in rubles by Russian export-oriented companies are other factors behind the currency’s gains.

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“The ruble (scheduled) to fall in the coming days … With the main tax payments for the month now appearing in the rear-view mirror, buyers of hard currency may begin to intervene,” CIB Sberbank said in a note.

The ruble is up about 44% year-to-date on the Moscow Stock Exchange, but it remains much weaker in banks. VTB (VTBR.MM)2 Bank of Russia offered to sell cash dollars and euros at 63.45 and 67.85, respectively.

Deputy Prime Minister Andrei Belousov said this month that the industry would be more comfortable if it fell between 70 and 80 against the dollar.

Against the euro, the ruble was 0.6% stronger at 54.20, having earlier jumped beyond 53 for the first time since April 2015.

Capital controls enabled the currency to ignore what the White House and credit agency Moody’s said on Monday was the first Russian default on its international bonds in more than a century. Read more

The Kremlin, which has hard currency from oil and gas revenues to make scheduled debt payments, dismissed the designation as artificial and designed under Western sanctions.

Right before Russia embarked on what it calls its “special military operation” in Ukraine, the ruble was trading at roughly 80 against the dollar and 90 against the euro. At the time, it was trading in a free-floating position, and was not backed by capital controls, it took a beating due to fears of sanctions.

In the stock market, the dollar-denominated RTS index (.IRTS) It fell 1.1 percent to 1,449.1 points. Russian ruble-based MOEX index (.IMOEX) It was 1% lower at 2,384.5 points.

Reporting by Reuters. Editing by Jon Stonestreet, Angus McSwan and Emilia Sithole Mataris

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