Ruble hits two-year high against euro on capital controls and weak demand | The mighty 790 KFGO

(Reuters) – The Russian ruble strengthened on Friday to a more than two-year high against the euro and retreated toward 66 against the dollar, supported by capital controls and weak demand for currencies, as the The specter of new sanctions against Moscow hung over the markets.

The European Union executive on Wednesday proposed the toughest set of sanctions yet against Russia for its actions in Ukraine, but concerns from several countries over the impact of halting Russian oil imports obstructed an agreement.

As of 0719 GMT, the ruble had gained 0.8% to trade at 69.57 against the euro, earlier rising to 69.1250, its strongest point since February 2020.

The ruble strengthened 1.1% against the dollar to 66.24, close to a more than two-year high of 65.3125 hit on Thursday, a record high not seen since the start of the COVID-19 pandemic.

The ruble has rallied over the past few weeks thanks to mandatory foreign currency conversion by export-oriented companies. Additionally, demand for dollars and euros was weak amid falling imports and restrictions on cross-border transactions.

“The ruble will be relatively stable or even strengthen again thanks to expensive oil and weak demand for foreign currency,” Otkritie Research said in a note.

Ruble moves are sharper than usual as market liquidity was reduced by central bank restrictions designed to support financial stability after Russia sent tens of thousands of troops to Ukraine on Feb. 24.

Meanwhile, trading activity is subdued as markets are only open for three days this week amid Russia’s long May holiday.

Brent crude oil, a global benchmark for Russia’s top export, rose 0.8% to $111.7 a barrel.

Russian stock indexes were mixed.

The dollar-denominated RTS index rose 0.8% to 1,128.9 points. Russia’s ruble-based MOEX index was down 1.3% at 2,372.7 points.

Analysts at Promsvyazbank said they expect stock markets to fall ahead of another long holiday weekend.

(Reporting by Reuters; Editing by Frank Jack Daniel)

James V. Hayes