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The Russian rouble pared early losses to gain against the dollar on Wednesday and headed back towards a five-year high against the euro, as some gas buyers in Europe sought to meet Russia’s demand for rouble payment and sovereign default risk resurfaced.

The rouble has become the best-performing currency this year despite a full-scale economic crisis, artificially supported by controls that Russia imposed in late February to shield its financial sector after it sent tens of thousands of troops into Ukraine.

By 1027 GMT, the rouble was 0.4% stronger against the dollar at 63.33, not far from the 62.6250 level reached on Friday, its strongest since early February 2020.

It had gained 0.9% to trade at 66.45 versus the euro, edging back towards its strongest level since mid-2017 of 64.9425, which it touched last week.

The rouble’s rally to multi-year highs was slowed this week as the central bank raised the ceiling for cross-border transactions, allowing Russian residents and non-residents from friendly states to channel foreign currency abroad at an amount equivalent to up to $50,000 a month. The previous limit was $10,000.

Export-focused companies are still obliged to convert 80% of their revenues, because the central bank cannot intervene after the West froze about half of its gold and foreign exchange reserves.

Russian rouble hovers near 5-year highs vs euro, stocks up

Gas buyers in Europe were fumbling to solve a payment conundrum, after Moscow at the end of March demanded foreign buyers start to pay for gas in roubles or risk losing their supply, and appeared to take different stances on the payment scheme.

Promsvyazbank analysts said they expected the rouble to consolidate in the range of 63 to 64.5 against the greenback on Wednesday.

Default risk resurfaces

Finance Minister Anton Siluanov on Wednesday said Russia would service its external debt obligations in roubles if the United States blocks other options and would not call itself in default.

Washington is considering blocking Russia’s ability to pay its U.S. bondholders by allowing a waiver to expire on May 25, which could push Moscow closer to the brink default.

Dollar up after biggest drop in 2 months as Fed’s Powell reaffirms hawkish outlook

Russia’s economy ministry gave new forecasts late on Tuesday, predicting Russia’s gross domestic product (GDP) would decline by 7.8% this year.

Meanwhile, economists at state development bank VEB said Russia’s economy, hit by unprecedented Western sanctions, is potentially resilient but needs a significant increase in imports and greater freedoms.

Russian stock indexes were climbing.

The dollar-denominated RTS index was up 2.6% at 1,231.6 points, its strongest since Feb. 23. The rouble-based MOEX Russian index was 2.1% higher at 2,475.8 points.

Veles Capital analysts said the focus on Wednesday could be on dividend stories. Shares in mobile operator MTS jumped around 15% after the company’s board recommended a dividend of 33.85 roubles ($0.5314) per share late on Tuesday.

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