The Russian ruble is “holding up better than expected” despite its oil being slapped with tough Western sanctions over Putin’s illegal invasion of Ukraine. Moscow’s currency rebounded from over two-week lows on Wednesday, clawing back some losses sustained in the previous session, helped by high gas prices and the prospect of Thursday’s income tax payments by exporting firms.
By 11.36am, the ruble was 1.9 percent against the dollar at 59.39 , after sliding to 61.20 in early trade, its weakest point since July 11.
It had gained 2.3 percent to trade at 60.27 versus the euro, recovering from a more than two-week low of 62.0575 touched earlier.
In a further boost for Putin, the International Monetary Fund said it was now only predicting a 6 percent decline in Russian GDP despite earlier April predictions forecasting an 8.5 percent fall.
The IMF said: “The Russian economy should have contracted less than expected in the second quarter, with exports of crude oil and non-energy products holding up better than expected.
“In addition, domestic demand is also showing some resilience thanks to the containment of the effect of sanctions on the domestic financial sector and a weaker-than-expected weakening in the labour market.”
It comes at a time when the latest data showed despite Russian exports of oil, gas and metal falling sharply last month, rising prices are counterbalancing the impact of western efforts against Moscow.
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These include restrictions on Russian households withdrawing foreign currency savings.
But the ruble slid lower in the last week, with the market anticipating measures from the government that may halt the currency’s strengthening.
Veles Capital said in a note: “The Russian currency, by all accounts, is turning to short-term decline in expectation of the introduction of a new budget rule.”
High commodity prices have also buoyed the currency, although the ruble’s strength has vexed officials as it dents Russia’s income from exports of those commodities and other goods priced in dollars and euros.
Brent crude oil, a global benchmark for Russia’s main export, was up 0.9 percent at $105.4 a barrel, but selling difficulties caused by sanctions mean Russia has been forced to sell at a discount.
Promsvyazbank analysts said: “It is worth noting that the decline in gas supplies from Russia to Europe also impacts the strengthening of positions of Western countries’ currencies.”
Meanwhile, Russian stock indexes are rising.
The dollar-denominated RTS index was up 2.6 percent to 1,166.0 points while the ruble-based MOEX Russian index was 0.2 percent higher at 2,197.5 points.
To make things worse for the bloc, on Tuesday, EU member states approved a weakened emergency plan to curb the demand for Russian gas.
The plan highlights fears that countries will be unable to meet goals to refill storage and keep their citizens warm during the winter months and that Europe’s fragile economic growth may take another hit if gas will have to be rationed.