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Title: Rouble dips against dollar after Russia eases capital controls

May 18, 2022 04:11AM ET

By: AnalysisWatch

The Russian ruble weakened against the dollar on Wednesday but stabilised near a five-year high against the euro after losing the support of some capital controls and as the risk of a state default returned to the fore.

The ruble has been the world's most dynamic currency this year despite the huge economic crisis, artificially propped up by controls imposed by Russia in late February to protect its financial sector after tens of thousands of troops entered Ukraine.

At 07:41 GMT, the ruble was 0.5% weaker against the dollar at 63.90, moving away from Friday's level of 62.6250, the strongest since early February 2020.

Against the euro, the ruble was up 0.2% at 66.96, close to its strongest level since mid-2017, 64.9425, reached last week.

The ruble eased slightly after the central bank on Monday raised the limit on cross-border transactions, allowing Russian residents and non-residents of friendly countries to send currency abroad in amounts equivalent to up to $50,000 a month. The previous limit was $10,000.

Export-oriented companies are still required to convert 80% of their earnings, as the central bank cannot intervene on its own after the West froze almost half of its foreign exchange reserves.

Analysts at Promsvyazbank said Wednesday they expect the ruble to strengthen to a range of 63-64.5 against the US dollar.

Attention will focus on Finance Minister Anton Siluanov's speech at a forum on Wednesday after a US administration official said Washington is considering blocking Russia's ability to pay US bondholders by allowing a key waiver to expire next week. This could push Moscow to the brink of default.

Russian stock indexes rose.

The dollar-denominated RTS index rose 1.3% to 1,216.6 points, its highest level since February 23. The ruble-denominated MOEX index rose 1.7% to 2,466.2 points.

According to analysts at Velez Capital, dividends could be in focus on Wednesday. Shares of mobile operator MTS rose 20% after the company's board of directors late Tuesday night recommended a dividend of 33.85 rubles ($0.5314) per share.

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