On Thursday, the Russian ruble recorded a rise, which put it on course for its best levels seen since 2015 as high commodity prices continued to give it support. Meanwhile, the announcement of the gas giant Gazprom to not pay dividends to its shareholders saw the company’s share price plummet.
Gazprom’s decision
By 0941 GMT, there had already been a decline of 27% in Gazprom shares, which brought them down to 218 rubles. This was after the company’s announcement that the 2021 results had prompted shareholders to decide against paying a dividend this year.
The decision put the ruble under pressure, as the dividend payments that are usually given to investors are converted into foreign currencies and other assets. Market analysts said that the lack of dividend payment from Gazprom would mean that the Russian currency would not benefit from the short-lived support it has to offer.
Ruble gains
Gazprom’s moves may have caused the Russian ruble to trim some of its losses, but the currency was still up by 1.3% against the US dollar at 52.55. This was after it had come close to the 50 mark on Wednesday, which had been a first for the currency since May of 2015.
The ruble climbed by 2.5% against the euro to reach 54.61, after it had reached 53 against the currency earlier this week, which was a first since April, 2015.
The Russian currency has delivered the best performance amongst the world currencies this year, thanks to measures that were taken for protecting the Russian financial system from the sanctions imposed by the West. This was after Russia had sent its troops into Ukraine on February 24th. Some of the measures include not permitting Russian households to withdraw their foreign currency savings.
Problems of a strong ruble
However, a strong ruble is not necessarily good news and officials have expressed concerns about its impact on export-focused businesses. Plus, a strong ruble also dents the country’s income that it generates by selling commodities and other products in exchange for dollars and euros.
Anton Siluanov, the Russian Finance Minister said on Wednesday that Russia could try to cap the strengthening of its currency by reducing state spending and using the funds for intervention purposes, or their budget revenue would be at risk.
It is also possible for the central bank to reduce some pressure on the ruble by reducing interest rates, as inflation in the country is coming down and cheaper credit is required by the economy. The next meeting of the Russian central bank about its interest rates will be conducted on July 25th. It remains to be seen what the central bank will decide in regard to its monetary policy.
The stock indexes in Russia were also down. There was a 5.6% drop in the RTS index, which is dollar-denominated, and this brought it down to 1,333.9 points. This was because of Gazprom’s announcement. The MOEX Russian index, which is based in rubles, also shed 6.7% and closed the day at 2,219.0.
