Volatile Forex: Rouble Faces Pressure Amid Currency Sales Cuts

The rouble weakened against the dollar and euro but steadied against the yuan due to factors like end-of-month tax deadlines and cutbacks in central bank forex sales. Market dynamics shifted with U.S. sanctions affecting trading platforms, impacting currency rates and creating volatility.

The rouble fell against the dollar and euro on Monday but held its ground against the yuan as the passage of an end-June tax deadline and a cut in central bank daily forex sales combined to exert pressure on the Russian currency. By 0825 GMT the rouble was trading 0.4% lower at 86.05 against the dollar. It was down 2% at 93.74 against the euro

Trade in both currencies shifted last month from the Moscow Exchange to the less liquid and more volatile interbank market as a result of U.S. sanctions against the exchange. The average dollar-rouble mixed composite rate, calculated by LSEG and based on data from international brokers and counterparties, stood at 85.74.

The rouble sank initially below 11.80 to the Chinese yuan but by late morning had recovered to 11.72, up 0.1%. Traders said several factors would weigh against the rouble as it enters the new month. It no longer has support from exporters converting forex into roubles to pay end-of-month taxes, as the deadline for that was last Friday.

"Today, at the start of trading, we expect continued pressure on the national currency against the background of a decrease in the supply of yuan from exporters after the June peak of tax payments has passed," said Bogdan Zvarich of Banki.ru, anticipating a push by the yuan towards 12 roubles. A second factor is that the central bank from Monday is reducing its daily sales of foreign currency to the equivalent of 8.4 billion roubles a day from 11.8 billion roubles in the first half of the year. The sales mirror flows in and out of the National Wealth Fund and are separate from currency operations the bank conducts on behalf of the finance ministry.

Finally, the government last month reduced the mandatory share of foreign currency revenue that exporters must convert into roubles to 60% from 80%, softening capital controls in part due to the rouble's recent strengthening. Brent crude oil, a global benchmark for Russia's main export, was up 0.65% at $85.55 a barrel.

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