On Monday, jittery trading in Moscow saw the Ruble fall against the US dollar, past the value of 58, as it adjusted to the decision of the central bank on Friday to reduce interest rates. Meanwhile, the tax-payment period that was supporting the Russian currency is also hitting its peak.

Ruble declines

The ruble had shed 1.3% by 1339 GMT against the US dollar to reach 58.01. It had also fallen 1.2% against the euro to trade at a value of 59.02. On Friday, the currency declined after the Russian central bank announced that it was cutting its interest rate to 8.0%.

This reduction of 1.5 percentage points had been bigger than expected and the Central Bank of Russia (CBR) further asserted that it would consider the need for more cuts if inflation continues to slow down and the economy contracts for longer than expected.

Market analysts said that the Russian currency was expected to move towards the 56 to 60 range against the US dollar in this week.

Ruble strength

This year, the ruble has delivered the best performance so far, as opposed to other currencies. This was because of the measures that were implemented in the financial system in Russia because of the sanctions imposed by Western countries after it began its military operation in Ukraine.

These measures include not allowing Russian households to withdraw their savings in foreign currencies. Before Moscow sent its troops into Ukraine on February 24th, the Russian currency had been trading at a value of 80 against the dollar and 89 against the euro.

Officials are vexed at the strength of the ruble because it affects the country’s income generated from exporting commodities and other items that are priced in euros and dollars. While some of the restrictions have been lifted by the Russian central bank, a number of capital controls are still in effect.

Tax payments made at the end of the month mean that export companies have to convert their forex revenues into ruble and this has given the Russian currency support in the previous two weeks. However, Monday saw that period reach its peak.

According to analysts, the ruble may weaken further against the US dollar with the tax period coming to an end and the verbal interventions of the authorities.

Other factors

Some of the other factors that are working against the Russian ruble are the market expectations that there will be currency interventions. Likewise, the prospect of the country implementing a budget rule that diverts the excess revenue it generates via oil into its rainy-day fund.

The stock indexes in the country remained mixed. There was a 0.5% decline in the dollar-denominated RTS index, which came down to 1,155.3 points. But, a 1.5% gain was recorded in the MOEX index, which is based on the ruble, and it rose to a value of 2,127.1 points.

On Monday, the Moscow exchange announced that they were suspending trading in Japanese yen from August 8th because of the difficulties and risks in settlements.

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