Rouble weakens as Russia slightly eases capital controls


FE Team | Published: June 07, 2022 22:28:57 | Updated: June 09, 2022 12:15:33


Rouble weakens as Russia slightly eases capital controls

The Russian rouble gave up gains to weaken on Tuesday, edging away from 61 to the dollar as the finance ministry slightly eased capital controls and investor focus turned to an expected central bank rate cut later in the week.

The finance ministry said export-focused companies were now allowed to transfer foreign currency to their overseas accounts under certain conditions, a move aimed at helping to pay for imports and prevent the rouble from strengthening, reports Reuters.

By 1503 GMT, the rouble was 0.2 per cent weaker against the dollar at 61.15, giving up intra-day gains of more than 1 per cent. It has stabilised in the relatively narrow range of 60.0-62.5 in the past few days after rapid swings in May.

The rouble lost 0.5 per cent to trade at 65.40 against the euro.

On the Moscow Exchange, the rouble has been supported by capital controls that Russia imposed to protect its financial system soon after sending tens of thousands of troops into Ukraine on Feb. 24.

But the Russian currency remains much weaker at banks. VTB, Russia's second-largest lender, offered to sell cash dollars and euros to the public for 82.00 and 87.00 roubles respectively.

Sanctions and Russia's efforts to meet its sovereign debt obligations remain in focus.

European Union countries last week agreed their sixth package of sanctions against Moscow over what it terms its "special military operation" in Ukraine, including phasing out all imports of Russian seaborne crude oil and petroleum products in six to eight months.

Russia's National Settlement Depository (NSD), which Moscow had planned to use to service the country's Eurobonds, will suspend transactions in euros after the EU added the entity to its sanctions list.

The Vedomosti daily reported on Tuesday, citing sources, that investors had not yet received finance ministry payments on Eurobonds due in 2026 and 2036 initiated before a key U.S. waiver allowing such transactions expired last month.

On the local debt market, yields on 10-year OFZ treasury bonds hit 8.88 per cent , their lowest since Jan. 13 as the market awaited the central bank rate decision due on Friday. Bond yields move inversely to prices.

A majority of analysts polled by Reuters expect a 100-basis-point cut to 10 per cent as the bank tries to make lending more affordable amid sluggish consumer demand and a pause in inflation.

Russian stock indexes were climbing, recovering from early losses.

The dollar-denominated RTS index was 0.2 per cent higher at 1,181.2 points. The rouble-based MOEX Russian index was up 0.5 per cent per cent at 2,293.4, earlier hitting its lowest point since May 24.

"We expect Russian stocks, particularly depositary receipts trading on the local market, to remain under pressure today due to EU sanctions on the National Settlement Depositary until more clarity becomes available," said Alfa Bank in a note.

Shares in struggling flag carrier Aeroflot outperformed the wider market, rising 4.4 per cent, after it announced plans to raise up to 185.2 billion roubles ($3 billion) in an emergency share issue.

Share if you like