Ruble Overpowers USD amid Positive Tax Period

As geopolitics continued to dominate Russian markets, the ruble (RUB) gained over 61.00 to the dollar (USD) on Friday, reaching a two-week high. This was aided by a positive month-end tax period.

The ruble has reached its highest level since October 7 at 60.57 by 3:00 pm GMT, up about 1% against the dollar.

It had risen 1.8% to trade at 59.50 against the euro (EUR), touching a two-week high earlier, and firmed 1.5% to 8.30 against the Chinese yuan (CNY), its highest level since October 5.

Ruble Bolstered by Currency Controls Prompted by Sanctions

The ruble has had the finest year of any currency in the world thanks to capital controls and falling imports brought on by Western countries’ tough sanctions against Russia over its activities in Ukraine. Hundreds of foreign businesses have also stopped doing business there.

A month-end tax period that often sees export-focused businesses transfer foreign exchange income into rubles to settle domestic tax bills supports the ruble.

That said, more Western sanctions over Moscow’s activities in Ukraine continue to loom over the Russian markets, which are still subject to irrational spikes in volatility.

 

Investors are also waiting in anticipation of the central bank’s rate decision for next week.

Igor Rapokhin, the chief debt market strategist at SberCIB Investment Research, predicted that the Bank of Russia would maintain its benchmark interest rate at 7.5% on October 28. “Since the September meeting, both new pro-inflationary and disinflationary factors have emerged,” he said.

Meanwhile, the price of Brent crude oil, the principal export from Russia, increased by 0.1% to $92.5 per barrel.

On Friday, Russian stock indices started down but eventually managed to climb back into bullish territory.

The RTS index, which measures price changes in dollars, increased 0.6% to 1,048.0 points after previously reaching its highest level since October 6. The MOEX Russian index, which is based on the currency, increased by 0.1% to 2,026.7 points.