RUSSIAN ROUBLE HITS NEAR 7-YEAR HIGH VS DOLLAR AS TAX PAYMENTS LOOM
Reuters - June 20, 2022
The Russian rouble surged on Monday to a near seven-year high against the dollar on Moscow Exchange, supported by capital controls and the promise of upcoming month-end tax payments, as the government presented its new budget.
By 1219 GMT, the rouble soared 1.2% to 55.75 against the dollar , earlier touching 55.44, its strongest mark since early July 2015.
It had gained 0.6% to 58.49 against the euro , edging closer to its strongest level in nearly five years of 57.10 hit in May.
The rouble, which has become the world's best-performing currency this year, is steered by Russia's high proceeds from commodity exports and a sharp drop in imports along with a ban on households withdrawing their foreign currency savings.
Top policymakers used Russia's annual economic forum in St. Petersburg last week to highlight the rouble's recent strength. There are concerns this could weigh on the economy as it tips into recession amid harsh sanctions over what Moscow calls a "special military operation" in Ukraine.
First Deputy Prime Minister Andrei Belousov said the rouble was overvalued and industry would be more comfortable if it fell to between 70 to 80 against the U.S. dollar.
The active discussion about a "fair" rouble shows there are concerns about the current level's impact on the budget and imports, said Dmitry Polevoy, head of investment at Locko-Invest.
Polevoy said it also showed the effectiveness and merits of Russia's budget rule, suspended since 2020, which caps Russia's budget spending, linking it to its non-oil and gas revenues, while channelling extra oil and gas revenues into its rainy-day fund.
Finance Minister Anton Siluanov on Monday said the fiscal rule should be designed to help build up reserves and stabilise the rouble.
This week the rouble could extend gains as companies will need to pay taxes, for which export-focused firms usually convert their dollar and euro revenues.
