Russian Rouble strengthens against dollar amid soaring oil prices

The Russian rouble exhibited resilience on Wednesday, firming against the US dollar, propelled by a surge in oil prices and recent capital controls imposed by Moscow. The rouble traded at 97.17 against the dollar, marking a 0.6% gain, while it strengthened by 0.9% against the euro, trading at 102.65. In addition, it saw a 0.5% rise against the yuan, reaching 13.26.

This uptick in the Russian currency followed last week’s governmental decree, requiring 43 groups of exporting firms to deposit a minimum of 80% of their foreign currency earnings with Russian banks. These entities were further mandated to sell at least 90% of these proceeds on the domestic market within two weeks. Although the affected companies’ names were not disclosed, these measures were implemented to bolster the rouble, which had experienced a notable 3% increase in a single session following the reintroduction of capital controls, mirroring the situation after Russia’s invasion of Ukraine in February 2022.

Finam Brokerage analyst Alexander Potavin shed light on the move, stating, “Fears about the fate of the rouble forced the Kremlin to act more decisively in support of its stability.” Potavin emphasised the challenges Russia faced in the wake of sanctions, making conventional strategies like raising the key rate insufficient for exchange rate stabilisation.

With external platforms inaccessible due to sanctions and internal constraints, Moscow had limited options, leading to the introduction of stringent currency control measures. Potavin predicted that the rouble would likely stabilise in the 92-97 range against the dollar in the upcoming months.

Additionally, the rouble is anticipated to find support from the month-end tax period, during which exporters usually convert foreign exchange revenues into roubles to meet local liabilities. Meanwhile, Russia’s finance ministry announced two OFZ treasury bond auctions on Wednesday, indicating ongoing efforts to stabilise the nation’s financial situation.

The rouble’s recent surge also finds support in the global oil market. Brent crude, a significant export for Russia, experienced a 2.6% increase, reaching $92.24 a barrel. This uptick not only strengthened the rouble but also bolstered Russian stock indexes, indicating a positive turn for the nation’s economy amid challenges.