The Russian rouble gave up early gains on Thursday, falling to more than two-week lows in tumultuous trading, weighed down by the end of a favorable tax period and anticipation that the government would attempt to limit the currency’s recent advance.
The deadline for income tax payments that help maintain the rouble is Thursday. This might cause exporters to reduce their sales of foreign currency profits, however Russia’s large current account surplus may protect the rouble from substantial weakness.
The rouble is also under pressure due to market expectations that the government would take action to counterbalance the currency’s recent rise, a worry for authorities since it reduces Russia’s revenue from commodities exports.
By 1342 GMT, the rouble was down 1.9 percent against the dollar, trading at 61.03, and down 2.1 percent against the euro, trading at 62.02, its lowest level since July 11 against both currencies.
According to Dmitry Polevoy, head of investment at Locko-Invest, the global economic slowdown, high global interest rates, a strong dollar, and the impact of sanctions on Russia’s economy all threaten declines in exports, productivity, and efficiency, while creating conditions for the rouble to weaken.
“But without a budget rule, this will not happen quickly,” Polevoy told Reuters. “Short-term we still see potential for rouble weakening, expectations for the end of the year are 65-70/USD.”
The market is expecting news that the government would soon revise and reintroduce Russia’s budget regulation that diverts surplus oil earnings into a rainy-day reserve with a new cut-off price.