Ruble rises ahead of taxes and amid 3-month highs in oil prices

MOSCOW, Jul 24 (Reuters) – The ruble rallied on Monday as it was supported by oil reaching 3-month highs abroad and exporters paying taxes locally on Friday, while news of a drone attack on Moscow this time was virtually ignored by the local currency market.

Nevertheless, a deterioration in the performance of the Russian currency on Monday is still possible with the traditional risk-free overnight positioning for the last time (conversely, the closing of safe positions, similarly accumulated over the weekend, supported the ruble this morning).

By 18.05 Moscow time, the dollar/ruble pair was at 90.44 with “for tomorrow” calculations, and the ruble is gaining half a percentage point, having previously risen to 90.19.

The euro/ruble exchange rate then was 100.16 – here the ruble is up by one percent, reaching 100.04 in the afternoon, also reflecting today’s drop in the single currency in the forex market.

Compared to the yuan, the ruble is up 0.4%, the quotation is close to 12.56.

This week, support for the ruble from Russian exporters may show itself, given the uniform tax payment on July 28. This also includes MET where commodity companies tend to increase sales of export foreign exchange earnings on the domestic market for a short period of time.

“The current peak of the current tax period falls on Friday, and against the backdrop of increased sales of foreign currencies by exporters, the USD/RUB rate may test the level of 90 rubles,” Bank Saint Petersburg analysts believe.

Today, the ruble may benefit from the sale/purchase of foreign currency announced by the regulator on Friday (from 1 August) related to the investment of NWF funds, as well as Friday’s decision of the Bank of Russia to raise the main interest rate by 100 basis points, to the level of 8.50% per annum, which was surprising for many market participants.

Both developments in the previous auction were ignored by the local FX market, which was busy consolidating for the weekend, but today they became additional bait on the ruble strengthening line.

“The decision (to raise the rate by 100 bps) did not go beyond the range of possible scenarios in the current conditions in the economy and financial markets,” Rosbank analysts estimate.

They also point out that as part of the average forecast for the second half of 2023, it is arithmetically possible to tighten up to 10 percent.

Such dynamics of the key CBR rate formally plays on the side of the Russian currency.

Oil is markedly higher on Tuesday night, reaching three-month highs amid expectations of cuts in supplies from Saudi Arabia and Russia in August, and hopes of state stimulus for a slowing Chinese economy.

The price of North Sea Brent is now up 1.8% to an estimated $82.52, the highest since April 25.

The price of the Russian Urals is around $67 a barrel well above the western price cap ($60.00).

Meanwhile, in the Forex market, the US currency is rising: the dollar index is estimated at 101.30 against 101.08 at Friday’s close.

The euro/dollar pair fell by almost half a percentage point to $1.1072.

The single currency suffered from weak data on economic activity in the largest European economies and the entire euro zone, while the same indicator of the US industrial sector was better than expected and the previous value.

In the spotlight of global markets – the results of the Fed and ECB meetings on July 26 and 27, respectively. Markets expect both regulators to raise key rates by a quarter of a percentage point, but at the same time, for the Fed, this may be the last tightening in the current cycle, while the European Central Bank may continue to hike in the fall. (Moscow office)