May 04, 2022 05:0AM ET
By: AnalysisWatch
The Russian rouble rose to a two-year high against both the dollar and the euro on Wednesday, supported by strong capital controls as the European Union proposed a new package of sanctions against Russia over events in Ukraine.
In an attempt to deepen Moscow's isolation, European Commission President Ursula von der Leyen proposed a gradual oil embargo on Russia as well as imposing sanctions on major Russian banks and banning broadcasters in Europe.
At 04:43 AM ET, the ruble was trading 2% stronger against the dollar at 69.53, having reached 68.6250 in early trade, its highest level since June 2020.
Against the euro, it gained 2.1% to trade at 73.19 after earlier reaching 72.00, its highest level since February 2020.
Movements in Russian markets are affected by the ruble's being supported by capital controls, while stocks are traded with a ban on short selling and foreign market participants are prohibited from selling shares in Russian companies without permission.
Market participants are questioning whether the current exchange rate is sustainable in the face of the restrictions after the ruble fell to a record low in early March as Western countries slapped unprecedented sanctions on Moscow and its financial system.
Russian markets reopened after the first of two consecutive long weekends to mark the May holidays.
Investors saw a brisk final day of trading before the holidays on Friday, as the central bank cut interest rates by 300 basis points to 14% and the Finance Ministry said it had managed to pay interest on eurobonds in dollars-an apparent late dodge to avoid a default after previously promising to pay only in rubles.