The Russian rouble experienced a significant surge, reaching its highest level against the US dollar in over six weeks on Friday. The Bank of Russia’s decision to raise interest rates to 15%, which exceeded initial expectations, was the main factor driving this surge. However, the rouble’s gains were later reduced. Additionally, the currency received support from exporters who increased their foreign currency sales.
The central bank raised the key interest rate more than the analysts’ predicted 100-basis-point increase. This decision marks the fourth consecutive meeting in which borrowing costs have been raised. The move responds to various factors, including the rouble depreciation, persistent inflationary pressures, and rising budget expenditures.
At 14:17 GMT, the Russian currency, the rouble, exhibited a 0.4% increase in value against the United States dollar, reaching a rate of 93.57. Before this, it had reached a peak of 92.5100, marking its highest level since September 12.
The currency experienced a 0.5% increase, reaching a value of 99.09 about the euro. Additionally, it strengthened by 0.3% against the yuan, settling at 12.74.
Bank Employees Expect Positive Changes
In line with Mikhail Vasilyev, the chief analyst at Sovcombank, the recent decision is expected to have a moderately positive effect on the rouble shortly. This is primarily due to the anticipated decrease in consumer and investment demand, particularly for imports. Additionally, the decision is likely to enhance the appeal of rouble savings.
According to Vasilyev, it is anticipated that the rouble exchange rate will fluctuate between 94 and 98 against the dollar, 99 and 104 against the euro, and 12.8 and 13.4 against the yuan by the conclusion of this year.
As per recent data, inflationary expectations among households experienced a slight decline in October, settling at 11.2%. However, this decrease must be more substantial to significantly influence the central bank’s perspective, as these expectations still surpass the targeted inflation rate of 4%. Yevgeny Suvorov, an economist at CentroCreditBank, highlighted this observation.
Based on Suvorov, there has been a sustained elevation in inflation expectations, reaching a historically significant level. In light of this, he proposed the possibility of implementing a rate increase of 16% during the upcoming meeting of the bank on December 15.
The Implementation of Currency Controls in Global Economies
In recent developments, various countries have taken significant steps to implement currency controls in their respective economies.
The Russian rouble has received support from month-end tax payments, which are due on October 30. These payments typically involve exporters converting their foreign exchange revenue to fulfill domestic liabilities.
President Vladimir Putin’s decree regarding required foreign exchange (FX) sales came into effect. This new regulation mandates 43 specific groups of exporters to bring back 80% of their FX revenue and sell 90% of that amount.
Since the announcement of the decree, the Russian rouble has experienced a significant strengthening, surpassing the 100 mark against the US dollar.
The Head of the Bank of Russia Doubts the Expediency of Introducing Controls
The doubts surrounding the controls have been reiterated by Elvira Nabiullina, the Governor of the Bank of Russia, on Friday.
According to an expert, it is believed that the influence of currency restrictions on the fluctuation of exchange rates will be minimal. In the foreseeable future, there may be a possibility of an event occurring within a brief timeframe.
Brent crude oil, a widely recognized benchmark for Russia’s primary export, experienced a 0.8% increase, reaching $88.61 per barrel.
In a recent development, the stock indexes in Russia experienced a decline.
The RTS index, denominated in dollars, experienced a slight decline of 0.1%, settling at 1,083.6 points. The ticker symbol serves as a representation of the MOEX Russian index and is in roubles. IMOEX experienced a slight decrease of 0.1% to reach 3,219.4 points.