The likelihood of exporters’ tax payments and the finance ministry’s ongoing foreign currency sales helped the Russian ruble rally on Tuesday. The currency regained some of the territories lost late in the previous session.
The ruble held steady at 74.74 vs. the euro and gained 0.3% against the dollar to reach 68.70. Versus the yuan, it had strengthened by 0.3% to 10.10.
The month-end tax payments, which occur when exporters use their foreign exchange earnings to settle domestic obligations, often serve to sustain the value of the Russian ruble. This year, because of a scheduling change, taxes must be paid in full on January 30.
Since a Western price ceiling on Russia’s oil sales and an EU oil export ban went into effect in early December, forcing Moscow to sell at a loss, the ruble has been under pressure from the outside for the past six weeks.
Russia’s primary export, Brent crude oil, which serves as a benchmark globally, was down 0.3% at $87.9 per barrel. Stock indexes in Russia were rising. The RTS index in US dollars increased 0.8% to 1,006.3 points. The MOEX Russian index, which is based on the ruble, was up 0.4% at 2,194.9 points.
The ruble bounced back and is currently holding firm; however, it should gradually lose value through the end of the year. By hiking interest rates, the Russian central bank slowed the economy, and by mandating that Rubles be used for Petro payments, it increased demand for the currency. These actions stabilized the situation. Then what? Although the emergency measures were sound, the economy won’t be permanently fixed.
USD/RUB is currently around 55 and should reach around 71 by the end of the year. However, the situation is very unstable. What happens after China and India have snatched up all the affordable Russian oil? The demand for Russian gas and oil in Europe is essentially gone. The absence of imports will cause prices to rise further as inflation increases.
On Tuesday, as traders considered the chances of a U.S. recession and the direction of Federal Reserve policy, the dollar traded near a nine-month low against the euro and gave up recent gains against the yen.
The U.S. dollar index, which compares the dollar’s value to six other currencies, including the euro and yen, fell 0.12% to 101.89, moving closer to the 7-1/2-month low of 101.51 from last week. The euro (EUR) increased 0.08% to $1.0880.
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