The Russian ruble saw a notable strengthening against major currencies on Thursday, reaching 93 against the US dollar and 101 against the euro. This marks the first time since August 1 that the ruble has reached these levels. The rally comes after the Russian central bank decided to raise the key interest rate to 12%.
Earlier in the week, the Russian currency hit a 16-month low of 101 against the dollar and 111 against the euro. The rebound seen in the ruble is attributed to not only the interest rate hike, but also to reports suggesting that the Russian authorities will not be implementing stricter capital controls to address the ruble’s decline. Economists have pointed to the low volume of foreign exchange revenue sales by exporters as a factor contributing to the ruble’s depreciation.
According to media outlet Vedomosti, the decision to hold off on tightening capital controls came in exchange for concessions from exporters. The government reportedly reached an informal agreement with leading exporters, who pledged to increase the sales of their foreign currency revenues. This move is expected to help stabilize the ruble’s value.
It is important to note that last year, the Russian authorities imposed strict capital controls after the ruble experienced a significant drop due to Western sanctions. These controls included the mandatory sale of 80% of forex earnings to support the ruble. However, as the economy adapted to operating under sanctions and the ruble recovered, the Bank of Russia decided to scrap capital controls.
Since early June, the Russian ruble has been weakening against the US dollar, trading at around 80-81 at that time. The recent rally has brought some relief to the currency, but it remains to be seen how sustainable this upward trend will be.
In conclusion, the Russian ruble has experienced a rebound against major currencies, reaching levels not seen since August 1. The decision by the Russian government to refrain from tightening capital controls, coupled with the interest rate hike, has contributed to this rally. Furthermore, an agreement with exporters to increase sales of foreign currency revenues is expected to support the ruble’s value. However, the future performance of the ruble remains uncertain, particularly in light of ongoing economic challenges and geopolitical factors.