(Bloomberg) The Russian ruble erased the heavy losses it incurred in the weeks following Russia's invasion of Ukraine.
The currency surpassed 81.16 per US dollar on Wednesday in Moscow operations, the level at which it closed on February 23, the day before President Vladimir Putin launched his attack. The recovery comes at an ironic moment, while broad sanctions paralyze Russia's economy and cause the government to stagger on the brink of default.
The ruble strengthened for the eleventh session out of 13 despite signs of increased pressure, with the dollar-ruble exchange rate falling to 5% to 79.11 in local trade, before closing at 79.70. As the European Union and the United States coordinate a new arsenal of financial sanctions against Russia, the Finance Ministry said its attempt to repay the debt in dollars had been blocked, which could move the country closer to its first external default in about a century.
The ruble plummeted immediately after the February 24 invasion amid international sanctions that effectively ended its time as a free trade currency. However, strict capital controls, including a ban on foreigners from selling Russian assets, as well as mandatory foreign exchange sales by exporters, have helped the ruble regain ground.
Putin also demanded that foreign buyers of Russian natural gas make their payments in local currency. So, for now, Russia may continue to benefit from cash inflows, as it sells natural gas and oil at high prices.
US Treasury Secretary Janet Yellen, at a congressional committee hearing, said Wednesday that people should not draw any deeper conclusions about the ruble rally, highlighting that the country has capital controls and that the ruble market is not free.
At the beginning of March, the local rate approached 122 rubles per dollar, which represents a collapse of more than 30% from the pre-attack level. While offshore price sources at several points indicated even weaker levels, liquidity was severely hampered.
Original Note:
Ruble Erases Invasion Loss Even as Default Risk, Sanctions Swirl
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