(Bloomberg) – The ruble’s blistering rebound accelerated on Monday, increasing pressure on Russia to ease control of a key capital flow based on the recovery of the currency.
With these gains now threatening to hurt budget revenues and exporters, exporters may decide to reduce their share of hard-currency earnings converted into rubles earlier this week, according to two people familiar with the matter. The mandatory ratio could now be reduced from 80% to 50%, people said, requesting anonymity because details of the plan are not public.
Russia’s rebound against the dollar strengthened Russia by more than 30% before invading Ukraine on February 24. Authorities are gradually easing restrictions in the days following the aggression. Drop in currency.
Restrictions on imports, coupled with a drop in imports amid widespread sanctions imposed on Russia by the United States and its allies, eliminated foreign exchange demand, as supply increased mainly thanks to higher prices for unauthorized energy exports.
The economy ministry said late Monday that the ruble’s appreciation had peaked and that capital flows and imports would adapt, easing the pressure on the rate, Tas reported.
Tatiana Orlova of Oxford Economics said: “The full lifting of capital controls will return the ruble to the 70-80 range against the dollar, which will be much more comfortable for the economy.” “This level of FX rate is already included in the price. Therefore, a return to this range would not increase inflation. “
The latest push by the ruble has led European companies to comply with President Vladimir Putin’s demands that they switch to fuel in Russian currency for natural gas.
The ruble jumped 13% against the euro in just four trading sessions, rising 6.2% to 59.15 on Monday alone. The Russian currency rose 5.2% against the dollar to 57.2700, preparing for the strongest closing since April 2018.
Putin has set the Russians on a wild hunt for dollars on the black market
Restrictions on the central bank’s reserves mean that it cannot conduct regular foreign exchange purchases before the attack. The Tass News Service first announced plans to reduce exporters’ mandatory sales requirements.
“The ruble is only trade-driven, and we are probably sitting on top of the current account surplus,” Tatz Ghose of Commerzbank wrote in a note on Monday. “In most cases, the exchange rate will weaken in the coming quarters.”
Nevertheless, Russia’s big business lobby has raised concerns about the ruble rally, announcing the creation of a special working group over the weekend to monitor the currency situation.
“Excessive regulatory burdens on business must be avoided in terms of currency control and regulation,” the Russian Union of Industrialists and Entrepreneurs said in a statement on its website.
The strength of the ruble is also potentially bad news for the budget, which receives a significant portion of the revenue from energy taxes levied on foreign currency but spends in rubles.
Evgeny Kogan, a professor at Moscow’s Higher School of Economics, said: “The stronger the rate, the greater the deficit. “And it makes things harder for exporters, increases costs and reduces revenues,” in ruble terms.
“If it lasts for half a year, it will be extremely unpleasant,” he said, adding that a more “comfortable” rate for the economy would be about 75-80 per dollar.
The press offices of the Bank of Russia and the Ministry of Finance did not immediately respond to requests for comment.
(Updated with the forecast of the Ministry of Economy in paragraph 5)
Most read from Bloomberg Business Week
© 2022 Bloomberg LP