May 25, 2022 05:07AM ET
By: AnalysisWatch
The Russian ruble surpassed above 56 versus the dollar for the first time since 2018 on Wednesday, hitting a seven-year high against the euro as export-oriented companies sold foreign currencies to pay taxes and traders took advantage of the expiration of a key bond payment exemption.
The United States said Tuesday it would not extend a key exemption that expired Wednesday that had allowed Russia to pay U.S. bondholders. The decision could push Moscow closer to the brink of default as Washington ramps up pressure on the country over its actions in Ukraine.
Ruble traders looked past it for now as the currency extended its gains.
The Russian currency has gained about 30% against the dollar this year, despite a broad economic crisis in Russia, making it the best-performing currency in the world.
It is managed by capital controls introduced in late February to protect Russia's financial sector after Moscow's decision to send tens of thousands of troops to Ukraine led to unprecedented Western sanctions.
At 04:40 AM ET, the ruble was trading 1.2% firmer against the dollar at 56.10, having earlier reached 55.80, its highest level since February 2018.
Against the euro, it gained 0.9% to trade at 58.02 after opening at 57.10, the highest level since May 2015.
The Russian ruble is receiving support from a month-end fiscal period, new gas payment terms requiring conversion of foreign currency into rubles, import cuts and currency restrictions, Veles Capital said in a note.
The currency's strength has raised concerns about its negative impact on Russia's budget revenues from exports. On Monday, Russia lowered the share of foreign currency revenue that exporters must convert into rubles from 80% to 50%.