Ruble Strengthens to New 2-Month High

The Russian ruble rose to its new maximum since January 14 against the U.S. dollar today as the current oil prices still suggest that the December-January devaluation was too strong.

The ruble also gained against the euro and reached a new high since January 26 against it. The Russian ruble is pegged to the basket of currencies that consists of 55 percent U.S. dollars and 45 percent euros. The oil now trades above $60, which, if not compared to the overpriced $150 per barrel seen in mid 2008, is a high price that should definitely support Russia’s currency.

Currently the Bank of Russia is committed to buy out excess of dollars and euros out of the domestic currency market to hold the ruble at above 36.95 against the basket of currencies. That should stop the ruble from appreciating any farther. On the other hand the government may use the appropriate moment to strengthen the currency before the possible high inflation wave in autumn to have some extra tool against the growing prices at that time.

USD/RUR went down from 31.843 to 31.697 as of 8:32 GMT today. EUR/RUR declined from 43.292 to 43.239.

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