Rouble Hits Four-Month High Amidst High Interest Rates and Capital Controls

The rouble surged to a four-month peak against the dollar, supported by high interest rates, state forex sales, and strict capital controls. As the tax period capped off, exporters converting foreign currency bolstered the rouble. Increased borrowing costs and rising crude oil prices further reinforced the currency's strength.

The rouble firmed to a more than four-month high against the dollar on Tuesday buoyed by high interest rates, state forex sales and capital controls, as a favourable month-end tax period reached its peak.

By 0955 GMT, the rouble was 0.3% higher at 88.33 to the dollar, earlier hitting 88.2575, its strongest since Jan. 24. Against the euro, the rouble rose 0.1% to 96.15 and gained 0.2% to 12.15 against the yuan .

Month-end tax payments that usually see exporters convert foreign currency revenue to meet local liabilities tend to support the rouble. The current tax period will end on Tuesday and the volume of foreign currency supply on the market should decrease, said Bank St Petersburg analysts.

Capital controls introduced by presidential decree in October 2023 require dozens of undisclosed exporting firms to deposit a high percentage of foreign currency earnings with Russian banks and then sell most of those proceeds on the domestic market. The controls were extended by a year at the end of April. The Russian state has also sharply increased its foreign currency sales this month.

High borrowing costs, with interest rates at 16% and a hawkish central bank suggesting that monetary policy easing is not likely soon, also supported the rouble. Brent crude oil, a global benchmark for Russia's main export, rose 0.2% to $83.25 a barrel.

Russian stock indexes rose. The dollar-denominated RTS index rose 1.5% to 1,191.6. The rouble-based MOEX Russian index gained 1.3% to 3,340.4. ($1 = 88.4200 roubles)