MOSCOW: The Russian rouble, supported by news of a three-day ceasefire in the war in Ukraine, strengthened against the U.S. dollar and was flat against the Chinese yuan on Tuesday, as the markets prepared for holidays at the start of May.
At 1130 GMT, the rouble was up 1.4% at 81.50 against the U.S. dollar, LSEG data based on over-the-counter quotes showed. The Russian currency has risen by about 38% against the dollar so far this year.
“The geopolitical factor continues to play an important role in the dynamics of the rouble,” Denis Popov from PSB said.
Most analysts expect the rouble to weaken later this year, tracking the price of oil, Russia’s main export commodity, which has been falling on concerns international trade wars will weaken the global economy and destroy demand.
Finance Minister Anton Siluanov said on April 23 Russia needs to boost its fiscal reserves to ensure at least three years of budget spending coverage if oil prices remain low for an extended period.
Siluanov called for a revision of the cut-off price for oil, above which budget revenues are directed to the reserve fund. Kirill Tremasov, adviser to the central bank governor, said on Tuesday that such a move will be negative for the rouble.
“Currently, we are living as if the oil price is $60. Lowering the cut-off price will mean that we will be living with a lower oil price. For the national currency, this could be moderately negative,” Tremasov said.
Sending more money to the fiscal reserve would also imply increased purchases of foreign currency on the domestic market.
Against the Chinese yuan, which is used by Russia’s central bank for its foreign exchange interventions and is the most-traded foreign currency in Russia, the rouble was flat at 11.20 to the yuan on the Moscow Stock Exchange.
Trade in the rouble could be subdued, dealers said, during the holiday period from May 1-4 and from May 8-11, when Russia marks the end of World War Two in Europe.
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