Sunday, October 2, 2022

Russian rouble surges to new multi-weeks high

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The Russian rouble surged to new multi-week highs on Friday while stocks fell in volatile trade as Moscow mobilises some 300,000 extra troops for the conflict in Ukraine.

Despite President Vladimir Putin’s mobilisation order, the rouble hit its highest level versus the U.S. dollar since Aug. 25 in trading on Friday and its strongest against the euro since July 19.

At 1106 GMT, the currency was up 2.8% against the greenback at 57.2 , having climbed as high as 3% at one point. Against the euro, it firmed past 56 for the first time in more than two months, gaining 3% to trade at 55.89 in the afternoon session in Moscow..

Currency controls and month-end tax payments, which see Russia’s exporters convert their foreign currency earnings into roubles to make payments to the treasury, are providing a boost to the rouble despite the geopolitical headwinds, analysts say.

“The increased supply of foreign currency could support the rouble amid reports of possible new sanctions from the European Union,” Yuri Popov, a strategist at SberCIB Investment Research, said in a research note.

But Russian stocks were deep in the red as markets remain jittery over how Russia’s mobilisation drive will affect the conflict. The dollar-denominated RTS index (.IRTS) dropped 1.7% to 1,154.8 points. The rouble-based MOEX Russian index (.IMOEX) was 4.3% weaker at 2,097.6 points.

Russian shares have seen heightened volatility all week in response to the mobilisation order and as Moscow stages referendums in four regions of Ukraine on joining Russia.

The new moves from Moscow have raised the prospect of further economic sanctions from the West, with the European Union saying it will discuss a new package of penalties.

After surging in Thursday’s session on news it had enough free cash flow to pay interim dividends, shares in Gazprom fell back in line with the wider market on Friday, down 2.6% in rouble terms.

“Today the Russian market is dominated by negative sentiment … the Friday factor seems to be stronger than usual as market players are not risking keeping their long positions over the weekend,” said Zarina Saidova, an analyst at Moscow-based Finam investment firm.

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