MOSCOW (Reuters) – The rouble hit a more than a seven-year high on Tuesday as capital controls and month-end taxes offset the negative impact of Western statements that Russia has defaulted on its international bonds for the first time in more than a century.
The White House and Moody’s credit agency said Russia has defaulted as sanctions have effectively cut the country off from the global financial system.
But the Kremlin, which has money to make payments from oil and gas revenues, has rejected the claims and accused the West of driving it into an artificial default.
At 1009 GMT, the rouble was 0.9% stronger against the dollar at 52.93 after hitting its strongest level since early June 2015 of 52.5750 on Moscow Exchange.
The rouble gained 0.8% to 55.88 against the euro, hovering at much stronger levels than before Russia sent tens of thousands of troops into Ukraine on Feb. 24.
Then the rouble traded near 80 to the dollar and 90 to the euro as it was in free-float mode, hammered by fears of sanctions and had no support from capital controls.
The rouble’s upside could be limited given growing concerns about the impact of the strong rouble on Russia’s revenues from selling commodities abroad for foreign currency.
Market players “see the current levels as attractive for purchasing hard currency, especially in light of the recent comments from Russian officials indicating that the rouble has become too strong,” Sberbank CIB said in a note.
Capital restrictions have made the rouble the best-performing currency this year and helped it to shrug off Russia’s debt issues.
The declared default will have no substantial impact on Russian securities as Eurobonds have long priced in the default, while the external debt market is shut for Russia in any case, said Alexander Afonin, head of debt research at Sinara investment bank.
This week’s peak of a month-end tax period that sees exporting companies convert dollar and euro revenue into roubles may add short-term support to the Russian currency.
On the stock market, the dollar-denominated RTS index slid 0.1% to 1,427.2 points. The rouble-based MOEX Russian index was 0.9% lower at 2,396.1 points.
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This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine
(Reporting by Reuters; editing by Barbara Lewis)