Despite the interest rate cut intended to moderate the Russian ruble’s bullish momentum, the Russian currency has stabilized around the 80 dollar mark today.
At the time of writing, the rouble was little changed at 82 against the dollar, after rallying to 71 last week, which was its strongest since November 11, 2021.
The Russian central bank announced a reduction in the main rate from 20% to 17%. The Bank of Russia stated that the ruble’s rebound from steep losses in the days after the invasion on February 24 had reduced the likelihood of dramatically higher inflation.
What you should know
- The ruble has recovered to 82 to the dollar as of April 11, nearly where it was before the invasion of Ukraine, after dropping to a record low of 136 to the dollar on March 10, 2022.
- This is owing to harsh limitations imposed by the Russian Central Bank, including requiring exporters to convert 80% of their dollar revenues into rubles, prohibiting people from taking more than $10,000 out of the country, and imposing a 12% tax on dollar transactions.
- The ruble eased this week after the central bank scrapped a 12% commission for buying foreign currency through brokerages and promised to lift a temporary ban on selling foreign exchange cash to individuals from April 18.
- However, export-oriented enterprises that are required to convert 80 percent of their currency revenues on the domestic market continue to support the rouble.
- While some nations, such as the United States, the United Kingdom, and Lithuania, have indicated that they will no longer buy Russian oil and gas, the European Union cannot afford to take such a step until alternative fuel infrastructure is in place. China and India are still major purchasers of Russian oil.
- Furthermore, any reduction in sales volume owing to sanctions has been more than an offset by a 60 percent increase in oil prices.