The Russian ruble surged on Monday, following a report that the government plans to cut a key foreign exchange limit for exporters.
surged 6.8% against the dollar on Monday, hitting a high of 57.54, and has pared its year-to-date losses to 23%. The ruble has steadily gained traction since its lows during the initial days of country’s invasion of Ukraine.
The ruble surged on Friday amid reports that companies in Italy and Spain would bend to Russian President Vladimir Putin’s demand that natural gas is paid for with rubles. Monday’s gains stem from a report in Bloomberg News that exporters would only need to convert 50% of their hard-currency earnings into rubles, instead of 80%.
The decision is expected to be announced as soon as this week, Bloomberg reported, citing sources close to the decision.
In response to Western sanctions, the Russian government has taken several steps to defend the ruble, including capital controls, and the Kremlin has still managed to amass extensive domestic reserves and record revenue from commodity exports.
“Indeed, the Russian economy and financial system avoided a collapse following the imposition of unprecedented and wide-ranging sanctions: the run on banks has swiftly dissipated, the country’s real GDP continued to grow in Q1, unemployment levels remain at multiyear lows, inflation growth is decelerating, and a default on the country’s sovereign debt has been averted to date,” said Andrius Tursa, Central and Eastern Europe adviser at Teneo, in a recent note to clients.
But that’s as Tursa said Russia is still headed for economic pain over the long run, with complications for its supply chains and looming technical regression across several industries.
“In addition, the departure of nearly four million Russian citizens — particularly IT professionals — since the start of the year, the pullout of hundreds of foreign companies, and the dearth of foreign investment will further weigh on the country’s economic and innovative potential,” he said.