MOSCOW: The Russian rouble suffered its worst week against the dollar this year, tumbling on a lack of foreign currency in Moscow and on the sale of Western businesses in Russia, despite gaining slightly on Friday afternoon as traders locked in profits.
The rouble skidded more than 2% against the US dollar on Friday to an intraday low of 83.50, its weakest since April last year, and fell more than 2% against the euro to an intraday low of 91.32 against.
Later in the day it recovered and was up 0.2% against the dollar at 81.21 on trade of about $1.5 billion - the highest volumes in at least two weeks - as trading desks locked in their profits ahead of the weekend.
Overall the rouble was down more than 5% against the dollar on the week.
The rouble had nosedived to 113 per dollar after President Vladimir Putin ordered the invasion of Ukraine in February 2022, but the central bank and finance ministry helped stabilise the currency, and it strengthened to 50 per dollar in July.
The West then imposed a price cap on Russian oil - the lifeblood of the Russian economy - late last year, since which rouble has weakened from about 60 per dollar to more than 80 this week.
Traders said the Russian currency has come under pressure recently from a cocktail of problems including the sale of Western assets to domestic investors, which stoked demand for dollars, while lower oil prices in March cut the country’s export revenue.
The reported transfer of $1.21 billion to Shell for its stake in the Far East Sakhalin-2 gas project was cited by traders as a major factor on Friday, as the daily trade in the rouble-dollar pair is now usually only about $1 billion, down from more than $3 billion a day before the war.
“Buying for the Shell deal is the main reason,” a trader at one of Moscow’s biggest trading desks said on condition of anonymity.
The trader said the market expected the rouble to strengthen against the dollar in coming days and weeks as Russian companies buy roubles for tax payments and on the back of higher oil prices.
“We are expecting a sharp strengthening of the rouble, for example, by 2% or more,” the trader said. This was the worst week for the rouble against the dollar in 9 months.
Yuri Popov, an analyst at Sberbank, Russia’s biggest bank, said he expected the rouble to return to around 80 per dollar in coming weeks and to stabilise there.
The rouble is the third-worst performer among global currencies so far this year, behind only the Egyptian pound and the Argentine peso, Reuters calculations show.
Traders said that the recent recovery in oil prices from last month’s declines is likely to support the currency in the coming weeks. Russia is the world’s second-largest oil exporter behind Saudi Arabia. Oil prices fell in late March but have rebounded after banking turmoil in the West and an OPEC+ decision to cut output targets. Brent crude oil fell as low as $70 in late March but was trading around $85 on Thursday.
Russia’s main Urals blend sells at a discount to Brent.
“The Russian currency remains in fundamentally weak conditions,” said Vladimir Evstifeev, head of analysis at Bank Zenik. He said exporters were reluctant to swap their export revenues for roubles in the expectation that the dollar would strengthen while importers were buying foreign currency in the expectation of a bounce back in consumer confidence.
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