Russian rouble falls past 58 vs dollar as market takes stock of rate cut

The Russian rouble fell past 58 against the dollar in jittery Moscow trade on Monday, adjusting to the central bank’s decision on Friday to cut interest rates, and as a rouble-supportive tax-payment period reaches its peak.

By 1339 GMT, the rouble was 1.3% weaker against the dollar at 58.01 . It had lost 1.2% to trade at 59.02 versus the euro .

The rouble fell on Friday after Russia’s central bank cut its key interest rate by a bigger-than-expected 1.5 percentage points to 8.0% and said it would study the need for more cuts as inflation slows and an economic contraction continues for longer than previously expected.

Promsvyazbank analysts said the rouble would be likely to move towards the upper end of the 56-60 range against the dollar this week.

The rouble has become the world’s strongest-performing currency so far this year, boosted by measures to shield Russia’s financial system from Western sanctions imposed after Moscow sent troops into Ukraine on Feb. 24.

The measures include restrictions on Russian households withdrawing foreign currency savings.

Before Feb. 24, the rouble traded near 80 to the dollar and 85 to the euro.

The rouble’s strength has vexed officials as it dents Russia’s income from exports of commodities and other goods priced in dollars and euros. The central bank has eased some restrictions, but many capital controls remain in place.

Month-end tax payments that usually prompt export-focused companies to convert part of their FX revenues into roubles have supported the currency in the last two weeks. Monday marks the peak of that period.

“In the coming days, we may see a further weakening of the rouble against the U.S. dollar amid (the) ending of (the) tax period and authorities’ verbal interventions, which may become real in (the short term),” said BCS Global Markets in a note.

The prospect of Russia reinstating a budget rule that diverts excess oil revenues into its rainy-day fund, as well as the market anticipating currency interventions, are also playing against the rouble.

Russian stock indexes were mixed.

The dollar-denominated RTS index (.IRTS) was down 0.5% to 1,155.3 points. The rouble-based MOEX Russian index (.IMOEX) was 1.5% higher at 2,127.1 points.

Moscow Exchange on Monday said trading in the Japanese yen would be suspended on its foreign exchange market from Aug. 8, suspending operations due to “the potential risks and difficulties in carrying out settlements in Japanese yen.”