This week, the Russian rouble value strengthened to an all-time high against the euro due primarily to firms that were expected to file their tax payments and wait for Friday’s central bank rate decision.
As per 1453 GMT, the rouble’s value has shot up 3.6% to 77.25 against the euro, standing at 76.96, its firmest point since June 2020.
Against the dollar at 73.17, the rouble was 3% higher, reaching levels experienced prior to Russia’s February 24 invasion of Ukraine.
But trading activity still performs lower than the levels experienced prior to February 24. The rouble’s movements are influenced by capital controls implemented in response to the country’s loss of FX backing following Western sanctions that nearly halved its reserves.
The currency has been backed by a record 3 trillion roubles ($40.25 billion) that companies owe in taxes this month, according to a few analysts. As it turns out, some export-focused businesses must sell foreign currency to settle their accounts.
Veles Capital notes that the outlook for the rouble is complicated by Russia’s tax payments, which may push it higher; however, an anticipated central bank rate reduction on Friday takes away hopes.
Market participants are awaiting the rate decision from the central bank since the two-emergency rate activity in the previous month – an increase to 20% in late February and a decrease to 17% on April 8.
The bank is expected to reduce 200 basis points from its benchmark interest rate, which would bring it down to around 15%.
The President of Russia, Vladimir Putin, has suggested cutting the subsidized mortgage rate from 12% down to 9%. It may indicate that he hopes for a revival in economic growth.
Putin complimented the “timely” decision of the central bank and the government to stabilize the economic turmoil at a meeting on the economy broadcast live.
Russia is struggling with the capital battle. In March, foreign investors’ share among holders of Russia’s OFZ treasury bonds plummeted to 17.7%, representing a new low for them since late 2012.