(Reuters) – The Russian ruble surged to a multi-week high on Friday as stocks tumbled in volatile trading as Moscow mobilized some 300,000 additional troops to the conflict in Ukraine.
Despite President Vladimir Putin’s mobilization order, the ruble reached its highest levels against the dollar and the euro since July in trading in Moscow.
By 1153 GMT, the ruble was 3.5% stronger against the dollar at 56.79, its strongest level since July 22. Against the euro, the Russian currency rose 4.4% to stand at 55.05 after jumping above 55 points at one time for the first time since then. July 4th.
Currency controls and month-end tax payments, which cause Russian exporters to convert their foreign exchange earnings into rubles for payments to the Treasury, are boosting the ruble despite geopolitical headwinds, analysts say.
An increased supply of foreign currency from exporters and reports of further sanctions against Moscow from the European Union, which make foreign currency investments less attractive, are supporting the ruble, SberCIB Investment Research said in a note.
“Moreover, according to data published in the media on Russian budget parameters, there will be no return to the budget base and associated foreign exchange purchases this coming year,” SberCIB said.
“In connection with this, the risk of the ruble weakening has receded,” said Yuri Popov, an analyst at Speer CIB.
The Ministry of Finance raised taxes on oil and gas and said it would not return to the usual budget law until 2025.
The Budget Code determines how much Russia’s revenue from oil and gas exports is used for daily government spending and how much money is transferred to the government’s sovereign wealth fund. Designed to ease booms and busts, it was suspended earlier this year due to Russia’s new financial situation.
However, Russian stocks fell sharply on Friday as markets remain nervous about how Russia’s mobilization campaign will affect the conflict. The dollar-denominated RTS index fell 0.9% to 1,163.3 points. Russia’s ruble-based MOEX was 4.1% weaker at 2100.4 points.
Russian stocks saw increased volatility throughout the week in response to the mobilization order, while Moscow holds referendums in four regions of Ukraine on whether to join Russia.
After rallying in the Thursday session due to the news that it had enough free cash flow to pay an interim dividend, shares in Gazprom (MCX 🙂 fell again in line with the broader market on Friday, down 2.6% in ruble terms.
“Today, negative sentiment dominates the Russian market… .
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