On Monday, the Russian ruble recorded declines against the US dollar and slid past 61. This was after Russian companies began converting depository receipts to local shares.
It was also because foreign investors from countries that have been designated as ‘friendly’ were able to make a return to the bond markets.
Decline in ruble
There was a 1.5% drop in the Russian currency at 1029 GMT against the US dollar, which saw it reach 61.49.
This was after the ruble left the narrow range between 59.45 and 61.45, where it had been stuck for the last consecutive nine trading sessions.
It also recorded a drop of 0.62% against the euro to reach a value of 62.44. There has been a decline in ruble volatility recently, after undergoing wild swings.
These had pushed down the currency to a record low of 121.53 against the US dollar in March on the Moscow Exchange, only days after Russia had sent tens of thousands of its troops to Ukraine.
In June, the currency had seen a rally that pushed it to 50.01, a peak of seven years.
Support for ruble
It is expected that the Russian ruble will get some support from tax payments at the end of the month, which usually mean that export-focused companies convert some of the foreign currency revenues.
There was a 1.4% drop in the RTS index in stock markets, which is dollar-denominated and this saw it come down to 1,100.2 points.
As for the MOEX Russian index, which is based ruble-based, it remained flat and was trading at 2,147.6 points.
Movements in the market remained muted relatively, even though analysts predicted that selling pressures would increase with global depository receipts (GDRs) being converted into shares.
Russian companies that had been traded on foreign exchanges would have their GDRs converted, along with those that were held in depositories in Russia.
The conversion would begin from August 15th into shares on the Moscow Exchange for the purpose of reducing the foreign control on these Russian companies in light of the sanctions imposed by the West.
The central bank
On Monday, the Russian central bank said that the depositories would write off the GDRs they are holding from the accounts of the holders, and shares of Russian issuers would be credited instead.
According to the Bank of Russia, this entire process is expected to take about three weeks. Analysts said that the stock market may not rise because the conversion would create a supply overhang, predicting a fall in the MOEX index below 2,100 points.
The Moscow Exchange is also permitted non-residents to return to bond markets from Monday, as long as they belong to countries that have not imposed sanctions on Russia.
However, analysts added that they did not expect this to have a major impact on the forex currency market.
The 10-year benchmark government bonds had seen their yields close at 9.18% on Friday, but they edged lower on Monday to reach the 9.16% mark.
