Russian Ruble Emerges as Best-Performing Currency in 2022 Amid Capital Controls

The Russian Ruble traded on a stable momentum against the dollar in the London session on Thursday after recording erratic moves last week amid notable fluctuations in supply and demand on Moscow Exchange.

At press time, the single currency had erased most of the daily losses against the dollar as the USD/RUB tapped a low of 61.20. The Russian ruble also traded with a stable momentum against the euro at around 67.25.

Interestingly, reports suggest that the ruble is the best-performing currency so far in 2022, thanks to artificial boosting from capital controls imposed by Russia after it kicked off its “special military operation” in Ukraine on February 24.

Meanwhile, new gas payment conditions for EU consumers, which require the conversion of foreign currency to ruble, and a drop in imports also provided a boost for the RUB. This also helped the Russian currency shake off domestic economic barriers and risks of a possible default on sovereign debt.

As the country remains on the verge of its first notable external debt default in over 100 years, a panel of investors suggested that Russia’s failure to settle a $1.9 million interest fee accrued on a dollar bond will cause payouts running into the billions of dollars.

Russian Central Bank Set for Another Rate Slash

In the domestic bond market, the 10-year OFZ treasury bond yields dropped to 9.2%, its lowest point since early 2022. This came as data highlighted that annual inflation recorded a slow down again after hitting its highest point in two decades. That said, the inflation data sparked expectations of another interest rate cut by the Russian central bank between June and July.

The Central Bank of Russia cut its prime lending rate to 11% last week, adding that there was more room for additional tapering this year.