May 19, 2022 04:35AM ET
By: AnalysisWatch
The Russian rouble rose above 63 points against the dollar on Thursday, buoyed by capital controls and looming tax payments that often require additional currency conversion into roubles to meet local obligations.
Despite the widespread economic crisis, the rouble has been the most dynamic currency this year on http://fingfx.thomsonreuters.com/gfx/rngs/GLOBAL-CURRENCIES-PERFORMANCE/0100301V041/index.html, artificially supported by the controls Russia imposed in late February to protect its financial sector after sending tens of thousands of troops into Ukraine.
At 0749 GMT, the rouble rose 0.8 percent to 62.95 per dollar on the Moscow exchange, approaching levels seen in the early 2020s.
Against the euro, the rouble strengthened 1.5% to 65.70 after a second sustained move to 61.1075 at market open, likely caused by a trading error and representing the rouble's strongest point since April 2017.
The rouble is supported by the requirement for export-oriented companies to convert 80 per cent of their revenues, while demand for dollars and euros is limited by capital controls and falling imports due to post-sanctions logistical disruptions.
In the bond market, the yield on 10-year OFZ Treasury bonds fell to 10.28%, from the 10.30% level recorded earlier in the week.
Yields, which move inversely to bond prices, are expected to fall further as the central bank plans to lower its benchmark interest rate this year to support the economy and inflation slows as the rouble strengthens.
The central bank is likely to cut its benchmark interest rate by 100-200 basis points from 14% at the next board meeting in June, said Dmitry Polevoy, chief investment officer at LockoInvest.
For the first time in many weeks, annual inflation slowed to 17.69% on 13 May from 17.77% the previous week, and weekly inflation fell to 0.12%, well below the 2.22% recorded in early March, days after Russia launched what it called a 'special military operation' in Ukraine.
Equity indices were mixed. The dollar-denominated RTS index rose 0.1% to 1,213.7 points. Russia's ruble-denominated MOEX index lost 0.9% to 2,423.8 points.