Russian Ruble Strengthens As New Sanctions Set By West: Highest Since March 2020

JAKARTA - The Russian ruble briefly hit its highest level against the US dollar since March 2020 on Thursday, supported by capital controls, while stock indexes also rose as the market watched developments around possible new sanctions against Moscow.

The volatile currency hit a high of 65.31 per dollar in early trading on the Moscow Exchange but at 0716 GMT was at 66.60, which is 0.4 percent lower than Wednesday's closing level (4/5/2022).

Morning highs haven't been seen since the start of the COVID-19 pandemic.

The ruble has strengthened in recent weeks thanks to mandatory foreign currency conversions by export-focused companies. There is also weak demand for the dollar and euro amid reduced imports and restrictions on cross-border transactions.

The ruble's moves were sharper than usual as market liquidity has been thinned by central bank restrictions designed to shore up financial stability after Russia sent tens of thousands of troops to Ukraine on February 24.

Against the euro, the ruble was up 0.3 percent at 70.20, hovering at levels last seen in February 2020.

Proposals for new sanctions against Russia, including an oil embargo, are in focus as the West seeks to deepen Moscow's isolation.

The ruble showed little reaction to the US Federal Reserve (Fed) move to raise its benchmark overnight interest rate by half a percentage point, the biggest jump in 22 years.

The immediate impact of US monetary policy on the Russian market is distorted by sanctions and investment restrictions, said LockoInvest Chief Investment Officer Dmitry Polevoy. But Russia will still feel the impact through global inflation and commodity prices.

Russian stock index rose. The dollar-denominated RTS index rose 2.6 percent to 1,142.7 points. Russia's ruble-based MOEX index was up 1.4 percent at 2,406.5 points.

"Thanks to the improving external backdrop, the Russian stock market may try to recover yesterday's losses if there is no news of new sanctions," said Promsvyazbank analysts, adding that MOEX could hit 2,450 points by midday as quoted by Antara.