Ruble strengthens on tax payments, yet may face downside pressure

Ruble strengthens on tax payments, yet may face downside pressure

Russian ruble fxcommentThe Russian ruble strengthened against the U.S. dollar on Monday, following four straight sessions of decline, as tax payments by companies in Russia boosted demand on the ruble.

Companies will pay 370 billion rubles ($7.4 billion) in taxes on Monday, according to a Bloomberg survey of economists.

The ruble retreated last week against the U.S. dollar after the central bank of Russia started purchasing $100 million to $200 million per day to replenish reserves.

The central bank’s purchases of dollars was deemed by investors as an intervention to halt the currency’s rally.

Some analysts see that the recent move from the bank indicates it came back to the old dirt-float exchange rate regime.

The ruble is “very strong” and the ministry has started buying foreign currencies, Deputy Finance Minister Alexey Moiseev said on May 19.

The central bank has slashed interest rates three times since the beginning of the year to halt the ruble’s rally.

The ruble has reached its highest level since 2013 versus the greenback last week, while, so far, it is the best performer in 2015 among emerging markets.

While the strong currency may help to ease inflationary pressures, it may negatively affect the country’s exports.

The ruble has appreciated more than 21 percent versus the U.S. dollar since the beginning of the year on recovery in oil prices and as Russia managed to find new trading partners, which offset the impact of the Western sanctions on its products on the back of its intervention in Ukraine.

The USDRUB pair faced resistance at 50 levels the previous week to trade around 49.95, noting that it still faces volatile movements since mid-April.

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Ahmed Mamdouh

Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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