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Rouble firms to 4-yr high vs dollar as Russian debt payment licence expires

Economy May 25, 2022 05:07AM ET
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© Reuters. FILE PHOTO: A vendor counts Russian rouble banknotes at a market in Omsk, Russia February 18, 2022. REUTERS/Alexey Malgavko/File Photo

(Reuters) - The Russian rouble firmed past 56 against the dollar on Wednesday for the first time since 2018, and touched a seven-year high against the euro as export-focused companies sold foreign currency to pay taxes and traders shrugged off the expiry of a key debt payment licence.

The United States said on Tuesday it would not extend a key waiver, which expired on Wednesday, that had allowed Russia to pay U.S. bondholders. The decision could push Moscow closer to the brink of default as Washington ramps up pressure on the country over its actions in Ukraine.

Rouble traders looked past that for now as the currency extended gains.

The Russian currency has firmed about 30% against the dollar this year despite a full-scale economic crisis in Russia, making it the world's best-performing currency.

It is steered by capital controls imposed in late February to shield Russia's financial sector after Moscow's decision to send tens of thousands of troops into Ukraine prompted unprecedented Western sanctions.

At 0840 GMT, the rouble was 1.2% stronger against the dollar at 56.10, earlier touching 55.80, its strongest mark since February 2018.

It had gained 0.9% to trade at 58.02 versus the euro, having opened at 57.10, its strongest since May 2015.

The Russian rouble is receiving support from a month-end tax period, new gas payment terms requiring conversion of foreign currency into roubles, import cuts and currency restrictions, Veles Capital said in a note.

The currency's strength has raised concerns about the negative impact on Russia's budget revenue from exports. On Monday, Russia cut the proportion of foreign currency revenue that exporters must convert into roubles to 50% from 80%.

The central bank on Wednesday said it would hold an extraordinary rate-setting meeting on Thursday, with analysts expecting further monetary easing after two 300-basis-point cuts to 14% following an emergency hike to 20% in late February.

Faced with rapidly slowing weekly inflation, the central bank has decided not to wait for its next meeting on June 10, said Promsvyazbank analysts, adding that the key rate may be lowered to 10-12%.

Russian stock indexes climbed.

The dollar-denominated RTS index was up 1.4% to 1,291.4 points. The rouble-based MOEX Russian index was 0.3% higher at 2,299.5 points.

Rouble firms to 4-yr high vs dollar as Russian debt payment licence expires
 

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Comments (3)
Sergio Savelli
Sergio Savelli May 25, 2022 12:02PM ET
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Someone please explain why a country with suficient Dolar reserves not allowed to pay its debt is considered in default and another one that seize reserves is a triple AAA .
Tre Hsi
Tre Hsi May 25, 2022 12:02PM ET
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"Someone please explain why a country with suficient Dolar reserves not allowed to pay its debt..."  -- Russia is in default if it insisted to pay in ruble, in breach of the terms of the loan.....tell me if someone owe you $10m, would you take 560m ruble as repayment, when you know in open market exchange those 560m is worth less than $50m?
Tre Hsi
Tre Hsi May 25, 2022 12:02PM ET
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less than $5m I mean
Tre Hsi
Tre Hsi May 25, 2022 12:02PM ET
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I don't know why people bother quoting the ruble exchange rate, clearly it's just an artificially inflated number quoted inside Russia.   Seriously, who in their right mind would exchange $ for anything less than at least 100 rubles in the open market?
jason xx
jason xx May 25, 2022 5:42AM ET
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Lmao the best preforming currency this year? Capital controls disqualify that unfortunately. We all know it would be worthless without government controls on it.
Ahmet Ozyaman
Ahmet Ozyaman May 25, 2022 5:42AM ET
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that consideration is included in current pricing
 
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