Ruble whipsawed as exporter dollar sales can’t offset rout

The ruble headed for a third day of losses, sinking as low as 110 per dollar, as Russia pressed on with its invasion of Ukraine and foreign currency sales by companies failed to stem the retreat. 

Sentiment remained bearish, with the mayor of Ukraine’s second-largest city saying residential areas were being bombed. Volumes are a fraction of their normal levels after Russia’s central bank introduced capital controls earlier in the week and shuttered local stock trading for the longest stretch since 1998. 

Mandatory sales of hard currency by exporters are the main source of support for the ruble, and the currency’s continued slump means they’re not yet enough to absorb the selling pressure, according to Andrey Kochetkov, a dealer at Otkritie Bank FC in Moscow. 

“The mess with the banking system in Europe is hampering the transfer of payments for Russian exports,” he said. “We think the problems will gradually be resolved. So far, all we can say is that the volume of hard currency isn’t sufficient to fix the situation.”

The currency, which was 8% weaker at one point, recouped some of its losses and traded 2.4% lower at 103.7075 as of 4:49 p.m. in Moscow.

With as much as half of its $640 billion foreign cash pile frozen overseas, the Bank of Russia has taken steps to quell capital flight, including a temporary ban on the transfer of funds generated by securities to non-residents. It wasn’t clear if foreign holders of ruble government bonds would be able to collect their cash even after the Finance Ministry made a scheduled coupon payment on its local debt on Wednesday.  

“It’s really like putting a finger in the air to predict the ruble at the moment,” said Mitul Kotecha, chief emerging-market Asia and Europe strategist at TD Securities in Singapore. “Given such high volatility, it’s suffice to say downside risks are intensifying.”

U.S. President Joe Biden used his first State of the Union address to label Vladimir Putin a “dictator,” and said the Russian president would pay a high price for his invasion of Ukraine. China’s foreign minister told his Ukrainian counterpart in a call that Beijing is “extremely concerned” about the harm to civilians.

A gap persisted between the ruble’s value in Moscow and that in the overseas interbank market. The offshore rate fell as low as 122.25 per dollar before trading around 113.