The ruble broke back below RUB70 to the dollar this week and was trading at RUB68.48 to the dollar as of the close of trading on June 3, Russia Today informed.
“The official exchange rate averaged RUB72.6/$ in May vs RUB75.4/$ in April, while the lowest levels were seen in late March-early April, when the ruble was trading around RUB79-80/$,” BCS Global Markets said in a note.
“A stronger ruble is an important factor for the inflation trend – the ruble’s appreciation slows import price growth and helps stabilize consumer inflation. Analysts see rising influence of other factors, for example, the deflationary effect coming from weak domestic demand,” BCS-GM’s note added.
As bne IntelliNews reported the ruble has performed remarkably well during this crisis, but it was badly wounded in the panic that followed the Kremlin’s decision to withdraw from the OPEC+ production-cut deal on March 6 falling as low as RUB80.8815 on March 24.
The ruble’s tether to the price of oil has been largely broken by the fiscal rule that mandates the Ministry of Finance to siphon off all revenues earned from oil exports above the price of $42 per barrel.
While there was some discussion about suspending the fiscal rule during the crisis to generate some extra spending money, Finance Minister Anton Siluanov came out last week with a decision that the prudent fiscal rule would remain in place.
Oil prices have also recovered remarkably quickly, driven by optimism over a new OPEC++ production-cut deal that will reduce production of oil by 9.7mbpd that was signed on April 13. The price of oil broke back above $40 per barrel briefly on June 3, which is back in the Kremlin’s comfort zone.
So far Russia and most of the other cartel members are sticking to the new deal. Indeed, Saudi Arabia has said that it will cut even more than it had committed to in the deal, to help prices recover even faster.