Russian Rouble Makes a Comeback
After weeks of volatility, the Russian rouble has finally rebounded, surging past 100 to the U.S. dollar and trading at 99.50 on Friday. This sudden upswing is attributed to President Vladimir Putin’s decree, which has opened up new payment options for European buyers of Russian gas.
A New Era for Energy Payments
The decree allows foreign currency flows to resume, enabling European buyers, including Hungary and Slovakia, to convert their currency into roubles in banks that are not under sanctions. This move has effectively bypassed Gazprombank, which was previously used for transactions but is now under U.S. sanctions.
Rouble Strengthens Against Dollar and Yuan
As a result, the rouble has strengthened by 1.5% against the dollar and 2.4% against China’s yuan in trade on the Moscow stock exchange. This significant rebound marks the rouble’s best week in four months, suggesting that the market has adjusted to the sanctions.
Adjusting to Sanctions
Russia’s Finance Minister Anton Siluanov believes that the volatility will disappear once a solution for payments is found. He predicts that the problems will be resolved within a week, allowing foreign trade participants to settle accounts with their counterparts abroad.
Analysts Weigh In
Analysts and traders share this view, attributing the rouble’s rise to Putin’s decree, which has unlocked energy payments. According to a forex trader in a large Russian bank, previously stalled large export revenues have now been “unblocked” and have hit the market, contributing to the rouble’s rise.
Russia’s Shift to Friendly Nations
Putin has stated that up to 90% of Russia’s foreign trade is now conducted in roubles and currencies of ‘friendly’ nations such as China’s yuan. While some importers still require dollars and euros, creating domestic demand for these currencies, Russia’s shift towards alternative currencies is evident.
The Role of Sanctioned Banks
Russia’s sanctioned largest lenders, including state-controlled Sberbank, are no longer able to hold and trade dollars and euros. However, many Russian banks have been importing large volumes of dollar and euro cash from third countries to service their clients. Meanwhile, banks not under sanctions, such as local subsidiaries of Austria’s Raiffeisen, Hungary’s OTP, and Italy’s UniCredit, have formed the core of the Russian market in dollars and euros.
Sberbank’s Outlook
Sberbank’s CEO German Gref believes that the fair value of the rouble lies in a range of 100-105 to the U.S. dollar. He does not expect any surprise exchange rate fluctuations in the near future, predicting that the rouble will fluctuate depending on the situation.
Leave a Reply