The Russian Rouble Rebounds as Oil Prices Rise
Introduction
The Russian rouble experienced a volatile session, bouncing back from its lowest level in over 18 months against the dollar. While reduced foreign currency supply continued to pose challenges, the currency found support in higher oil prices.
Middle East Tensions
Risk appetite was dampened by events in the Middle East. Following a raid by Hamas fighters that shattered Israel’s reputation of invincibility, the Israeli military called up 300,000 reservists. This further impacted the stability of the rouble.
Rouble Recovery
By 1500 GMT, the rouble strengthened by 0.7% against the dollar, reaching 99.75. This recovery came after hitting a low of 102.3450 earlier in the day, marking its weakest point since March 23, 2022. The currency had previously experienced a record low of 121.5275 after Russia’s invasion of Ukraine in February 2022.
Positive Movements
The rouble also gained ground against the euro, trading at 105.24, a 0.5% increase, and firmed by 0.6% against the yuan, reaching 13.64.
Less Intervention
Unlike the previous tumble into triple digits in August, which led to an emergency rate hike and discussions about currency controls, interventions have been more limited this time. The Bank of Russia raised rates to 13% in September, and analysts expect another hike on October 27. Persistent rouble weakness is a concern for Russia’s long-term growth prospects.
Oil Prices and Tax Revenues
Oil, a crucial export for Russia, experienced a 3.9% increase, reaching $87.85 a barrel. This rise was attributed to the military conflict in the Middle East. Russia’s finance ministry also expects tax revenues from energy companies to increase in October.
Positive Forecast
Alor Broker’s Alexei Antonov stated that if the forecast holds true, oil companies will need to significantly increase their sales of foreign exchange revenues to settle with the budget. This could lead to a rouble recovery in the coming week, as exporters are unlikely to limit their sales until the end of the month when taxes are due.
Stock Market Performance
Russian stock indexes saw positive movements, primarily driven by oil companies. The dollar-denominated RTS index increased by 1.4% to 1,001.3 points, while the rouble-based MOEX Russian index rose by 0.9% to 3,172.2 points, reaching a near one-month high.
