Resurgent ruble resumes rally

The ruble firmed sharply on the Moscow Exchange on Monday, recouping most of last week’s losses as it retained support from capital controls and Russia’s strong trade account.

At 11:16 GMT, the ruble gained nearly 9% on the US currency at 61 rubles per dollar, and was up around 10% against the euro to trade below below 63.

Last Wednesday the Russian currency hit a four-year high of 55.80 to the dollar, and reached a seven-year high of 57.10 against the euro.

“The overall fundamental picture for the ruble is not changing much … We’re not ruling out a return to levels of 60-63 to the dollar,” Dmitry Polevoy, head of investment at firm LockoInvest, told Reuters.

Despite the unprecedented sanctions imposed on Russia, surging exports and strict capital controls have sapped demand for foreign currencies and sent the ruble soaring to its strongest levels in years. It had risen to become the world’s best-performing currency so far this year, according to Bloomberg, before last week’s slide. However, a rapidly appreciating ruble is a problem for both exporters and the government budget. To stem the ruble’s strength, the Bank of Russia on Thursday slashed the key interest rate by three percentage points to 11%, suggesting that more cuts would follow as inflation risks subside.

Previous government attempts to slow the currency’s rise failed and the ruble continued to appreciate.

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