Economic Insider

Rouble Surges Against Euro Due to EU Getting Ready for Tax Payments

rouble

Photo: Reuters

It’s no surprise that the Russian rouble is bucket-listing again. Since June 2015 and March 2018, it has been steadily climbing to its highs against the euro and dollar. The major factors that analysts say contribute to the strengthening. EU nations getting ready to pay Russia for gas as well as capital retaliation measures implemented by Moscow.

Russia says that half of Gazprom’s 54 customers have opened accounts with the company. As several European firms are all entering payments for their gas supplies quickly before deadlines hit.

Opening those accounts is attainable following EU executives enabling member states to continue purchasing Russian gas. Without violating multiple sanctions they have jointly implemented against Russia for what Moscow describes as its “special military operation”. In Ukraine that began on February 24. 

One of the critical grounds for the rouble upturn is the shift to roubles from euros. It will occur in European payments for Russian gas. As per a statement from Yuri Popov, a strategist at SberCIB Investment Research. A hub of Russia’s No. 1 lender Sberbank.

The rouble has been trading at 61.10 – 5% high – against the euro in recent hours from attaining 59.02. Its firmest since June 2015. 

Meanwhile, against the dollar, it firmed over 4% on the day to 59.10 after touching 57.0750. A strong level not experienced since March 2018. 

With a 30% raise this year, the rouble has been one of the best-performing currencies. This is despite an economic decline inside their country. Due to the sanctions placed on Moscow for its attack on Ukraine in late February. 

Russia’s appreciation of the rouble is primarily thanks to export companies. They have converted their profits since Western sanctions froze almost half of Russia’s gold and forex reserves.

“Exporters are forced to sell (foreign currency), and there is no one to buy it,”. Said a trader at an investment firm in Moscow. 

This past week, the rouble has been strengthening against the dollar and euro due to arrangements made for end-of-the-month taxes. Still, demand for the dollar and euro remains low because of Russia’s import disruptions. Bans on pulling out foreign currency from bank accounts and transferring it outside Russia. 

“The key question is whether the central bank will step in as the excessive. Rouble firming is not in the finance ministry’s and budget plans,” said an analyst at CentroCreditBank, Evgeny Suvorov. 

On Friday, the head of the central bank’s monetary policy department, Kirill Tremasov, said the rouble continues to be a free-floating currency, according to the RIA news network. 

The central bank has not given any sentiment on the rouble rate.

Opinions expressed by Economic Insider contributors are their own.

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