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Peter Davis

An writer at FOMOdrive

  • Aug 28, 2023
  • 2 min read

The ruble has risen sharply amid rumors about the introduction of foreign exchange controls

On Wednesday, the ruble continued to gain strength in response to reports from the Financial Times, Reuters, and other outlets.

The dollar dropped over three rubles from its peak during the day.

On Wednesday, the dollar fell by 2.43 rubles to 94.67 rubles, while the euro fell by 2.82 rubles to 103.2 rubles, according to the Moscow Exchange. This marks the third consecutive day of strengthening for the Russian currency, with the dollar having already lost about seven rubles from Monday's highs.

Anticipation of news about further measures by the Russian government to stabilize the exchange rate has caused the ruble to significantly strengthen. The day prior, the Bank of Russia increased the key rate by 350 bp to 12%. Later, it was revealed that the Russian authorities were discussing the stabilization of the ruble with exporters and examining the reintroduction of the mandatory sale of foreign exchange earnings, as reported by Interfax-CEA.

On Wednesday, the Financial Times (FT) reported, according to two sources, that President Putin had called an emergency government meeting after the central bank's key rate increase to 12% failed to stop the ruble from weakening.

The Ministry of Finance's proposals to bolster foreign exchange controls will be discussed at a meeting on Wednesday.

The Ministry of Finance has suggested that Russian exporters must sell at least 80% of their foreign exchange earnings within 90 days of delivery, or else they will be denied government subsidies.

Measures taken to protect the Russian economy include prohibiting the payment of dividends overseas, eliminating import subsidies, restricting currency swap transactions, and decreasing the amount of foreign currency that exporters can withdraw from Russia.

Reuters reported on Wednesday that authorities are holding an urgent meeting to discuss the reintroduction of a requirement for exporters to sell their foreign currency earnings. This was also reported by Vedomosti sources.

Yesterday, Bloomberg reported that the Russian Federation may be considering the reintroduction of capital controls in an effort to halt the decline of the ruble.

Promsvyazbank notes that the likelihood of the dollar dropping back to the 90-93 ruble range in the coming days is still very high. It is possible that the US currency will go below the 90 mark if the authorities take effective measures to support the ruble and/or there is a noticeable increase in the supply of currency from exports.

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