On July 25th, the Russian rouble strengthened against the dollar, reaching a more than one-week high. This strengthening was attributed to two main factors: high oil prices and an upcoming month-end tax period. During this tax period, exporters typically convert their foreign currency revenues into roubles, which creates demand for the local currency and boosts its value.

At 0715 GMT on that day, the rouble was 0.4% stronger against the dollar, trading at 90.15, which was its highest level since July 14. The Russian currency also gained 0.6% against the euro, trading at 99.87, and lost 0.2% against a stronger yuan, trading at 12.60.

The rise in oil prices, with Brent crude oil reaching $82.97 a barrel, played a significant role in supporting the rouble’s value. Oil is a crucial commodity for Russia, and its price has a direct impact on the country’s export revenues.

The rouble had been under pressure recently, sinking to a more than 15-month low in early July. Various factors contributed to this pressure, including an abortive armed mutiny by the Wagner mercenary group in late June and drone attacks within Russia, which Moscow blamed on Ukraine. These incidents increased geopolitical tensions and affected investor risk appetite.

To address inflation concerns and stabilize the currency, the Bank of Russia had implemented a larger-than-expected rate hike of 100 basis points, bringing the interest rates to 8.5%. The higher rates make investments in Russian assets more attractive and should provide some support to the rouble.

Despite the challenges faced by the currency, Russian stock indexes were performing well on that day. The dollar-denominated RTS index was up 0.9% at 1,032.0 points, and the rouble-based MOEX Russian index rose by 0.5% to 2,951.1 points.

Overall, these factors combined to strengthen the Russian rouble against major currencies on July 25th.

Source: Reuters