Rouble Sees Upturn Against Euro as EU Prepares to Pay for Gas

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Russian Rouble

Photo: Reuters

The Russian rouble has been on an upward trend against the euro and dollar since June 2015 and March 2018. Some analysts think that the rouble’s recent surges are due to Europe getting ready for payment in gas and capital retaliation measures imposed by Moscow.

The majority of Gazprom’s 54 customers have opened accounts with the company, as European firms are paying their gas bills close to due dates. 

Opening those accounts is attainable following EU executives enabling member states to continue purchasing Russian gas without violating multiple sanctions they have jointly implemented against Russia for what Moscow describes as its “special military operation” in Ukraine that began on February 24. 

Yuri Popov, a strategist at SberCIB Investment Research, a hub of Russia’s No. 1 lender Sberbank, stated that one of the critical grounds for the rouble upturn is the shift to roubles from euros that will occur in European payments for Russian gas. 

The rouble has been on a tear, rising over 5% today to 61.10 against the euro in volatile trade after climbing as high at 59.02 earlier this morning – its firmest since June 2015.

Meanwhile, against the dollar, it firmed over 4% on the day to 59.10 after touching 57.0750, a strong level not experienced since March 2018. 

The rouble had skyrocketed about 30% to the dollar this year, even with a full-fledged economic decline in Russia. It became one of the best performing currencies but was artificially backed by retaliations implemented in late February that protect its financial state following its invasion of Ukraine. 

The rouble’s rise results from companies that make money through exports. These businesses converted their foreign currency profits due to Western sanctions, which froze almost half the country’s gold and forex reserves. 

“Exporters are forced to sell (foreign currency), and there is no one to buy it,” said a trader at an investment firm in Moscow. 

The rouble’s recent rise is due to tax season, but demand for dollars and euros remains low because of banned import chains and bans on pulling out foreign currency from bank accounts and transferring it outside Russia. 

“The key question is whether the central bank will step in as the excessive rouble firming is not in the finance ministry’s and budget plans,” said an analyst at CentroCreditBank, Evgeny Suvorov. 

On Friday, the head of the central bank’s monetary policy department, Kirill Tremasov, said the rouble continues to be a free-floating currency, according to the RIA news network. 

The central bank has not given any sentiment on the rouble rate.


Opinions expressed by Market Daily contributors are their own.

Lilian Swift

Lilian is currently taking her masters in accountancy and currently works as a public accountant in New York.

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