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Rouble strengthens towards 96 vs dollar after emergency rate hike
Global Banking & Finance Review®
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By Alexander Marrow
(Reuters) -The Russian rouble strengthened towards 96 to the dollar on Wednesday, one day after the central bank hiked interest rates to 12% at an emergency meeting and amid speculation over what other steps Russia may take to prop up its struggling currency.
Tuesday’s extraordinary rate meeting and 350-basis-point key rate increase came in response to the rouble plummeting past the symbolic 100 threshold against the dollar at the start of the week and a public call from the Kremlin for tighter monetary policy.
By 1139 GMT, the rouble was 0.9% stronger against the dollar at 96.24. It had gained 0.8% to trade at 105.15 versus the euro and firmed 0.9% against the yuan to 13.14 .
This week has seen some of the rouble’s most volatile trading all year. It reached a near 17-month low of 101.75 against the dollar on Monday and briefly traded at 92.60 on Tuesday morning, before closing at 97.09.
The rate hike, though stopping the rot, will likely not be enough to halt the rouble’s slide, Western and Russian analysts generally agreed on Tuesday.
Five sources told Reuters on Wednesday that Russian authorities were discussing bringing back the compulsory sale of foreign currency revenues for exporters. One high-level source said the change could be made “at any moment”.
Two sources said the mandated conversion of up to 90% of exporters’ foreign currency earnings was under discussion. A similar measure was adopted to stabilise financial markets shortly after Russia’s February 2022 invasion of Ukraine.
Brent crude oil, a global benchmark for Russia’s main export, was up 0.2% at $85.07 a barrel.
Russian stock indexes, in volatile trade for several sessions, were lower.
The dollar-denominated RTS index was down 1.4% to 996.1 points. The rouble-based MOEX Russian index was 2.2% lower at 3,046.9 points.
“The positive reaction to the rate revision by the Bank of Russia was replaced with a correction, linked to regulator’s tighter rhetoric and expectations of capital control measures,” Sinara Investment Bank said in a note.
(Reporting by Alexander Marrow; additional reporting by Lidia Kelly; Editing by Sam Holmes, Christina Fincher and Nick Macfie)
The rouble is the currency of Russia, abbreviated as RUB. It is used for all transactions within the country and is a key indicator of the Russian economy.
An emergency rate hike is a sudden increase in interest rates by a central bank to stabilize the economy, often in response to rapid currency depreciation or inflation.
Monetary policy refers to the actions taken by a central bank to control the money supply and interest rates to achieve macroeconomic objectives like controlling inflation and stabilizing the currency.
Foreign currency revenues are earnings generated by companies from sales or services in currencies other than their domestic currency, often impacting exchange rates and economic stability.
Interest rates are the cost of borrowing money, influencing economic activity by affecting consumer spending, business investment, and inflation rates.
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