Why did the ruble skyrocket to a record high as the year’s best performing currency?
Spectacular increase
Reuters news agency (UK) said, the Russian ruble appreciated more than 6% against the euro on May 23, to the highest level in nearly 7 years. This growth was driven by capital controls, oil prices and the upcoming tax year.
Also according to Reuters, the ruble has gained about 30% against the dollar this year despite the full-blown economic crisis unfolding in Russia, making it the currently best performing currency in the world.
The currency is getting a boost as export-focused companies have had to convert their foreign currency earnings following sanctions that froze nearly half of Russia’s gold and foreign exchange reserves.
As the central bank and government lift restrictions, the ruble could continue to appreciate further in the medium term, said analysts at Tinkoff Investments.
Near the fall, the foreign exchange rate could start to stabilize near the 1 euro level which would be about 60-65 rubles when imports are restored and restrictions are likely to come, according to the analyses. capacity is removed.
Analysts at Bank Otkritie (Russia) said that the ruble could stabilize at 1 dollar to 55 rubles within a month before weakening at the end of the year.
Russia’s requirement that foreign buyers pay for gas purchases in rubles also contributed to the currency’s recent rally, analysts said last week.
The supply of foreign currency from exporters, high oil prices and the impending month-end tax period will often prompt exporters to convert their foreign exchange revenue into rubles to meet payments, Reuters pointed out. domestic debt. All these factors have contributed to the growth of the coin.
Russian coins. Photo: AFP
EU countries are about to pay for gas to Russia
Earlier, Russia announced that half of the 54 customers of the gas giant Gazprom have opened an account at Gazprombank in the context of gas payments coming due.
One of the main reasons for the ruble’s recovery is the fact that countries are converting euros to rubles in the process, said Yuri Popov, a strategist at SberCIB Investment Research, a unit of Sberbank (SBER). gas payments with Russia.
Central bank intervention?
The Vedomosti daily reported on May 23, citing sources, that Russia’s central bank had begun buying foreign currency to prevent a sharp, uncontrolled rise in the ruble.
The central bank denied the report, saying “this information does not reflect reality”.
If the central bank implements such interventions, it would be easy to see an impact on the ruble rate, said analysts at state-backed bank Promsvyazbank.
“However, such news can affect the market and cause a weakening of the ruble,” pointed out Promsvyazbank.
Since the beginning of 2022, the ruble has grown spectacularly against the US dollar. Despite comprehensive Western sanctions against Russia’s financial system, the ruble’s local currency quickly strengthened.
The Russian ruble has become the leader in growth among the 31 major world currencies tracked by Bloomberg.
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