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Title: Rouble extends losses after rates slashed; Eurobonds in focus

May 27, 2022 05:00AM ET

By: AnalysisWatch

The Russian ruble extended losses on Friday after falling sharply in the previous session as the central bank cut interest rates and announced further rate cuts, while the prospect of loosening capital controls and a possible sovereign default pressured the currency.

The ruble slumped about 10% against the dollar and euro on Thursday after the central bank cut its key interest rate to 11%, its third straight 300-basis-point cut, as inflation falls from a 20-year high.

At 03:27 AM ET, the ruble was trading 2.1% weaker against the dollar at 66.63, a more than two-week low. On Wednesday, the ruble hit 55.80 against the dollar, its highest level since February 2018.

The ruble lost 4.4% to 70.99, moving further away from Wednesday's seven-year high of 57.10.

So far this year, the ruble has been artificially revalued to become the world's best-performing currency.

New payment terms for gas, which require foreign currency to be converted into rubles, and a drop in imports have also contributed.

However, the ruble has now lost support from the month-end fiscal period, when export-oriented companies typically exchange foreign currency for rubles to settle local liabilities.

Economy Minister Maxim Reshetnikov said Thursday that the currency's strength, which has raised concerns about the negative impact on Russia's budget revenues from exports, is making Russian goods uncompetitive abroad.

He expects the mandatory 50% share of foreign exchange revenues that exporters must convert into rubles to be further reduced.

Market eyes are on Russia's National Settlement Depository (NSD), which announced Friday interest payments of $71.25 million and 26.5 million euros ($28.5 million) on two eurobonds.

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