Putin urges Russian government to curb strong ruble

By bne IntelliNews July 20, 2016

Russian President Vladimir Putin has called on his government to develop a plan for curbing the strengthening ruble, which has recently showed resilience to volatile oil and other commodity prices prices.

The national currency quickly slipped from an almost nine-month peak on Putin's verbal intervention on July 19. The ruble to US dollar rate went up by 0.9% d/d to RUB63.39 as of 6pm Moscow time, while inching up by 0.3% d/d against the euro to RUB69.84.

Following the president's comments and their effect on the currency market, Kremlin press secretary Dmitry Peskov on July 20 said strengthening the national currency rate requires "fine tuning".

"It [the ruble] requires any measures regarding export-oriented industries," said Peskov, adding that "this requires adjustments that are prepared in advance". 

The ruble's recent strengthening despite unstable oil prices was attributed to the tax and dividend payment period in July-August. The last tax payment period is due to be over on July 25, with up to RUB310bn ($4.9bn) to be paid in VAT, extraction taxes, and excise duties, raising the demand for rubles in the corporate sector.

In addition, up to RUB500bn in dividend payments are due in July and August, some of which would be raised from selling foreign currency.

Reuters speculated whether Putin's demands will mean that the Central Bank of Russia (CBR) will start buying foreign currency off the market and replenish gold reserves to restrain the ruble. However, the regulator did not provide any comments to the agency.

Whatever the means, finding the target ruble rate could be a challenge, reflected in the strong ruble having mixed impact on the balance of payments in the second quarter.

On the one hand, the current account surplus in the second quarter took a sharp fall due to accelerated growth in imports and lower export revenues, raising questions about the effects of the strengthening ruble on the national economy.

However, while the stronger currency undermined the trade balance, it also improved the financial account dynamics, with capital outflow continuing to decelerate and dropping to only $24bn in April-June from $8.2bn in January-March.

Peskov also conceded that the currency rate was a double-edged sword, noting that a balance is necessary "so as not to get entirely immersed in favour of one sector of the economy".

The one sector that would want to see a weaker ruble is energy extraction. On June 28, Fitch Ratings argued that currency flexibility is a main factor securing a stable level of capital investment in ruble terms over a horizon of several years for Russian oil and gas producers.

The real effective exchange rate of the Russian ruble to foreign currencies strengthened by 1.2% m/m in June, having gained 0.5% m/m to the US dollar and 1.4% m/m to the euro in real terms, according to CBR data release published on July 8.

Previous reports mulling the unexpected attractiveness of Russian assets amid volatility steered by Brexit said that the ruble was among the top emerging performers this year.

Although the m/m growth of the currency of the world's largest energy exporter slowed down from 2% m/m seen in May and 3.8% m/m in April, ytd gain as end of June 2016 extended to 7.5%.

In the second quarter, the real effective ruble rate gained 6% q/q, recovering from 4.7% decline seen in the first quarter of the year.

The average nominal rate of the ruble to the euro was RUB78.25 and RUB70.10 to the dollar in January-June overall.

As of the end of June, the nominal ruble to euro and dollar rates decreased to RUB71.21 and RUB64.26 (RUB81.91 and RUB75.17 at the end of January, respectively, and RUB73.5 and RUB66.08 as of the end of May).

Related Articles

Russia's Sberbank selling its Ukrainian subsidiary

Russia’s largest bank Sberbank is selling its subsidiary in Ukraine to a consortium of investors that includes Latvia’s Norvik Bank and a private Belarusian company, Sberbank said in a statement ... more

Russia’s central bank reduces key rate in surprise decision

The Central Bank of Russia (CBR) reduced the key lending rate by 0.25 percentage points to 9.75% on March 24, despite broad market expectations of no change this month. The ruble strengthened to a ... more

Ex-Trump aide Manafort reported to be long-term Putin lobbyist

Paul Manafort, US President Donald Trump's former election campaign manager, struck a covert deal with Kremlin-affiliated Russian oligarch Oleg Deripaska in 2006 to promote the interests of President ... more

Register here to continue reading this article and 2 more for free or purchase 12 months full website access including the bne Magazine for just $119/year.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

If you have any questions please contact us at sales@intellinews.com

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at sales@intellinews.com

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

Already a subscriber or registered - click here to recover access.

If you a IntelliNews Pro user - click here to login.

Thank you. Please complete your registration by confirming your email address.
A confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.

Dismiss