The Russian ruble is strengthening against its US peer to close out the trading week, buoyed mostly by higher energy prices. Investors seeking opportunities beyond America’s borders have been bullish on Moscow, forecasting a stronger economy and a rising ruble. Despite the chaos in the broader financial markets, could the ruble find more strength?
According to the Federal State Statistics Service (FSSS), the annual inflation rate climbed to a four-year high of 5.7% in February, up from 5.2% in January. The market had penciled in a reading of 5.5%, which is still way above the central bank’s 4% target. Moscow witnessed upward pressure from food, non-food products, and services.
On a monthly basis, the consumer price index (CPI) jumped 0.8% last month, higher than the median estimate of 0.6%.
Russia’s Ministry of the Economy anticipated that the annual inflation rate will peak in March and then begin to ease.
New data from the Association of European Businesses show that total vehicle sales in Russia advanced 0.8% year-over-year in February to a little more than 120,000 units.
The central bank confirmed that foreign exchange reserves declined to $586.3 billion in February, down from $590.7 billion in January.
Earlier this week, the IHS Markit services purchasing managers’ index (PMI) came in at 52.2 last month, down from 52.7 in January – anything above 50 indicates expansion. The services sector reported expansion in output and new orders growth, offset by a decrease in new exports orders.
But foreign exchange markets are mostly bullish on the ruble because of surging crude oil prices. After the Organization of the Petroleum Exporting Countries (OPEC) agreed to roll over production cuts and Saudi Arabia extended its voluntary cuts, oil prices have been on a tear, rallying above $66.
April West Texas Intermediate (WTI) crude oil futures advanced $2.20, or 3.45%, to $66.03 per barrel on Friday on the New York Mercantile Exchange. May Brent crude futures surged $2.58, or 3.87%, to $69.32 a barrel on London’s ICE Futures exchange.
Bloomberg is reporting that the Russian government could borrow nearly $7 billion less in 2021 amid rising oil prices that have helped flood its revenues. According to sources close to the situation, Moscow is proposing reducing borrowing to $43 billion, down from $50 billion. Others say that borrowing could fall to as low as $13.5 billion.
The USD/RUB currency pair tumbled 0.45% to 74.2922, from an opening of 74.5656, at 18:54 GMT on Friday. The EUR/RUB dropped 0.9% to 88.55, from an opening of 89.26.