May 30, 2022 05:21AM ET
By: AnalysisWatch
The ruble recovered sharply Monday in volatile trading on the Moscow Stock Exchange, recouping some of last week's heavy losses as it was supported by capital controls and Russia's strong trade balance.
The ruble plunged last week as the central bank cut interest rates and announced further rate cuts. The prospect of loosening capital controls and a possible sovereign default added to the downward pressure.
At 04:07 AM ET, the ruble was nearly 5% higher at 63.47 to the dollar. Last Wednesday, it reached 55.80 against the dollar, its highest level since February 2018.
Against the euro, the ruble was up 6% at 65.40 after hitting a seven-year high of 57.10 last Wednesday, at the height of month-end tax payments that typically prompt export-oriented companies to convert foreign currencies to meet liabilities.
"The overall fundamental picture for the ruble does not change significantly." "We do not rule out a return to a level of 60-63 to the dollar," said Dmitry Polevoy, head of the investment department at LockoInvest.
Thanks to capital controls, the ruble had risen to become the world's best-performing currency of the year until last week's slump. The ruble was also supported by new payment terms for gas supplies to EU consumers, which require foreign currencies to be exchanged for rubles, and a drop in imports.
Markets' eyes are on Russia's ability to service its foreign debt after the United States brought the country to the brink of a historic default by not renewing its license to pay bondholders, while Washington is ramping up pressure following what Russia calls a "special military operation" in Ukraine.
Russia plans to settle its Eurobond obligations through a mechanism similar to that used to pay for Russian gas in rubles, Finance Minister Anton Siluanov told the Vedomosti daily.
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