Russian Rouble Faces Volatility Amid Reduced Currency Inflows and Market Sanctions

The Russian rouble weakened against the dollar due to reduced foreign currency inflows from exporters and lower FX sales by the Russian state. Sanctions on Moscow Exchange and the National Clearing Centre led to price disparities, making the rouble more volatile. Analysts expect the central bank to raise interest rates.

The Russian rouble weakened against the dollar on Tuesday, pressured by reduced foreign currency inflows from exporters at the start of the month and lower FX sales from the Russian state in July. By 0732 GMT the rouble was 0.9% down at 87.40 against the dollar.

Sanctions on the Moscow Exchange and its clearing agent, the National Clearing Centre (NCC), led to varying prices and spreads as trading shifted to the over-the-counter (OTC) market on June 14, obscuring access to reliable pricing for the Russian currency. This shift has also introduced significant volatility in lower-volume trades, resulting in sharp and frequent swings in the rouble’s value.

Against the yuan—the most traded foreign currency in Moscow prior to the latest sanctions—the rouble declined by 0.6% to 11.96. It also fell 1.6% to 95.29 against the euro, according to OTC market analysis.

The rouble's weakening is further exacerbated by the absence of customary month-end tax payments that compel exporters to convert foreign currency to local currency. Reduced FX sales by the central bank and increased foreign currency purchases by the finance ministry have also stifled the rouble’s ability to strengthen.

Despite high oil prices, capital controls, and elevated interest rates lifting the rouble to one-year highs in June, the central bank is expected to raise interest rates from 16% to potentially 18% in its upcoming meeting on July 26, according to Reuters analysts. Alor Broker's Alexei Antonov noted that high-interest rates could still attract investments into rouble instruments, citing the currency’s fundamental strength. Brent crude oil—a global benchmark for Russia's main export—was down 0.3%, priced at $85.50 per barrel.