On Monday, the Russian rouble rose against the US dollar to hit a high of seven years on the Moscow Exchange. This was after the Russian government put forward its new budget and the currency received support from upcoming tax payments at the month end and capital controls that have been put in place.
Rouble Gains Against Dollar
There was a 1.2% gain recorded in the Russian rouble by 1219 GMT, as it climbed to 55.75 against the dollar. Earlier in the day, the currency had reached the 55.44 mark, which is the strongest the rouble has been since the beginning of July 2015.
The currency also recorded gains of 0.6% against the euro to reach 58.49. This brought the rouble closest to the strongest it has been against the euro in five years at around 57.10, which was last seen in May.
Rouble Continues Strengthening
Statistics indicate that the Russian rouble has been the best performing currency in the world so far. This has occurred because of the high proceeds of the country generated from commodity exports and a massive decline in imports because of sanctions. Likewise, households in Russia have also been banned from withdrawing their savings in foreign currency.
Last week in St. Petersburg, Russia had its annual economic forum where top policymakers talked about the strengthening of the rouble. There have been concerns that the currency’s strengthening could drive the Russian economy into recession, due to the harsh sanctions that have been imposed by Western nations because of its so-called military operation in Ukraine.
Andrei Belousov, the First Deputy Minister, stated that the Russian currency was overvalued and it would be better if it declined against the US dollar to trade at a value of somewhere between 70 and 80. Market experts said that this discussion indicates there are concerns about how the rouble could impact imports and the budget.
They said that this also highlighted the merits and effectiveness of the budget rule that has been suspended in Russia since 2020. This rule imposes a cap on the budget spending, which is linked to its non-gas and oil revenues and extra revenues are put in a rainy-day fund.
Rouble Could Extend Gains
On Monday, Anton Siluanov, the Finance Minister, stated that they should design the fiscal rule for building reserves and stabilizing the rouble. It is possible that the currency could actually extend its gains this week because companies have to pay their taxes. When this happens, export-dedicated companies have to convert their dollars and euros into roubles.
Market analysts said that exporters would begin to sell their forex sales because there are taxes of about $1 trillion to be paid and they also have to pay dividends later in the month. They also said that it was possible for the rouble to hit the 50 mark against the greenback as well as the euro by the end of the month because demand will be less than the offers of the currency.
