Rouble Recovered From its Worst Result Since Late January

On Monday, the rouble recovered from its weakest mark since late January, after Russia proposed more diplomacy over European security concerns.

The Russian Federation dismissed renewed fears of an imminent incursion into Ukraine as Western hysteria. It repeatedly denied plans to invade. Foreign Minister Sergei Lavrov suggested to President Vladamir Putin that Russia continue with diplomacy. 

The rouble gained 0.8% against the U.S. dollar to 76.74 by 14:07 GMT, swinging from 78.29 a level last seen on January 28, to as strong as 75.93 during a volatile session. 

The Russian currency suffered serious losses in January to a near 15-month low of 80.4125 on the Ukraine crisis.

The rouble pared those losses in recent week, hitting its highest level on Thursday since early 2022, before falling again on the next day. The Russian currency declined after the United States urged all its citizens to leave Ukraine within 48 hours. 

Rouble and the euro

Against the euro, the rouble gained 1.1% to 86.62 after touching its weakest point since January 27 of 88.6950.

Ukrainian and Russian dollar-denominated government bonds fell to the lowest of the crisis so far. Yields on Russia’s benchmark 10-year rouble-denominated OFZ bonds reached 10.18% their highest in several years. As a reminder, yields move inversely to prices.

The Russian currency is susceptible to geopolitical fears. However, it retains fundamental support from Russia’s record strong current account surplus fuelled by high commodity prices. The rouble is also supported by the country’s central bank’s monetary tightening that, in theory, makes investing in rouble assets more lucrative. 

The central bank jacked up its interest rate to 9.5% last week. It also indicated a further rate increase was likely.

Russian stock indexes declined to the lowest since late January. 

The dollar-denominated RTS index fell 2.2% to 1,437.8 points. The rouble-denominated MOEX Russian index declined 1.5% to 3,492.0 points.