On Wednesday, the Ruble trimmed its losses in volatile trading, as the finance minister of Russia said that there could potentially be interventions for easing the upside pressure on the Russian currency. The Ruble had reached the 50 mark against the US dollar, which is the first to happen after 2015.
Strong Ruble is a concern
This year, the Russian Ruble has become the best-performing currency in the world, as it has received a boost due to several measures. These include imposing a ban on Russian households from withdrawing their savings in foreign currencies. These measures had been implemented for protecting the financial system of the country from the sanctions imposed against Moscow by Western nations due to its invasion of Ukraine.
Officials have become concerned about a strong Ruble because it will affect export-focused companies. Plus, it would also dent the income of the country that it gets from selling commodities, gas, and other goods abroad for euros and dollars. Market analysts said that there were several Russian companies that were already facing financial problems, as they are mostly non-gas and non-oil exporters.
Finance Minister warns of interventions
Anton Siluanov, the Finance Minister of Russia, stated that they could reduce state spending and direct the funds for interventions in foreign currency in order to cap the strengthening of the Russian Ruble, as it has become a threat to the budget revenue.
After his comment, the Russian Ruble trimmed some of its gains and was down by 0.4% on the day at 52.00 against the greenback, after it had climbed to 50.01. Some of the other factors that have contributed to the gain in the currency include a sharp decline in imports, the revenues from commodity exports, and tax payments at the month-end in Rubles from Russian companies that are export-focused.
Market analysts said that the Ruble could fall in the next few days, as the main tax payments for the month are already done and this might draw in purchases of hard currency.
While the Moscow Exchange has seen the Russian Ruble climb 44%, its value is significantly weaker at banks. The No.2 bank in Russia, VTB had made an offer of selling cash euros and dollars at 67.85 and 63.45, respectively.
Andrei Belousov, the Deputy Prime Minister, said that it would be better for the industry if the Russian Ruble was trading between a range of 70 and 80 against the greenback. The Ruble had climbed 0.6% against the euro at 54.20, after reaching 53 earlier for the first time after April 2015.
The currency has mostly remained unaffected, thanks to capital controls, despite the White House and others claiming that Russia has defaulted on its international bonds. The Kremlin has denied these claims, as it claims to have the money for making its scheduled payment. Before Russia had begun its ‘special military operation’ in Ukraine, the Russian Ruble had been trading close to 80 against the US dollar and 90 vs the euro.