Russian rouble under stress amid the pressure of Western sanctions

The Russian rouble has been retreating, dropping by over 3% yesterday. The rouble has failed to make a strong recovery after a sharp drop last week after the market became anxious over the possibility of dropping export revenues amid restrictions on Russian oil.

Russian rouble drops

The rouble has been sharply losing value over the past week after registering an around 8% drop in the past seven days alone. The currency is on the path to a significant monthly drop as an oil embargo and price cap was implemented. According to the country’s finance minister, the recent drop was attributed to the recovering imports.

At the time of writing, the rouble was showing signs of strength and recovery from the recent decline. The currency was trading at 2.9% stronger against the dollar at 72.02. The BCS World of Investments noted that the rouble was facing increased volatility towards the end of the year.

“At the end of December, the rouble is likely to remain extremely volatile as the market will need to find a new equilibrium under changed trade flows and increased sanctions pressure,” the BCS note read. The note added that during the last week of December, the rouble would trade between the 68 and 71 range.

However, it seems that the rouble is correcting to the positive side, as seen in its performance during the past day. The rouble has gained 3% against the euro to 76.70 and gained 2.82% against the Japanese yen.

Nevertheless, the recent decline in the rouble has not lost the gains made by the rouble this year. The currency remains the world’s best performer in 2022 against major currencies such as the dollar. The gains made by the rouble this year could be attributed to the capital controls and the dropping imports.

The First Deputy Prime Minister of Russia, Andrei Belousov, has addressed the weakening rouble, saying it was good given the declining exports and revenues. Belousov noted that a strong rouble had already played its role, adding that it would be beneficial if the rouble rate against the US dollar remained in the 70-80 range.

Performance of Russia’s financial markets

Brent crude oil, which is used to show the performance of Russia’s main export, has gained slightly over the past day to $85 a barrel. On the other hand, the stock indices in Russian financial markets showed a mixed performance.

The RTS index has dropped by 2.56% in the past day to 935 points. On the other hand, the MOEX Russian index has dropped by 0.19% to 2,222.5 points. This index is trading at its highest levels in two weeks.