Breaking News
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Ruble Nears Two-Month High, Sparks Doubt Over ‘Synthetic’ Rally

Forex Apr 07, 2022 14:44
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters.

(Bloomberg) -- The ruble rallied for a third day to approach the highest in more than two months, evoking skepticism from currency strategists who say the market is broken because of capital controls, forced dollar sales and ultra-thin volumes.

Russia’s currency jumped as much as 7.3% on Thursday, sealing its rebound from a collapse that followed the nation’s invasion of Ukraine and sanctions that isolated it from the global financial system. A key driver of the latest gains is the continued demand for Russia’s oil and gas in Europe and elsewhere, handing the country almost $1 billion a day in revenue.

Mocked as ‘Rubble’ by Biden, Russia’s Ruble Comes Roaring Back

Strategists say the ruble’s rally isn’t credible: The exchange rate is no longer free-floating and the currency would be at a very different level if barriers were removed. With Russia tottering on the brink of a debt default and the economy shrinking, the ruble no longer reflects the country’s fundamentals, they say.

“It’s a completely artificial level and so very little credence should be given to it,” said Cristian Maggio, the head of portfolio strategy at Toronto Dominion Bank in London. “Almost no one can trade the ruble and those who really do, they trade at very different levels than what the screens report. From a market and macroeconomic point of view, it makes no sense.”

The exaggerated moves in the ruble coincide with a plunge in trading volumes. The 20-day average of daily volumes in the currency has fallen to the lowest since 2012 as foreign investors cut exposure to Russian assets. 

Ruble volatility is surging. Realized 30-day swings have jumped to 79%, a record high that beats the 74% reached in the aftermath of the 2014 ruble crisis. While one-month implied volatility has come off its peak, it still remains high at 55%, compared with less than 12% before the invasion.

Given the thin participation, the ruble’s moves are dictated by the government’s tough capital controls. Those include a ban on foreigners selling Russian assets as well as mandated hard-currency sales by exporters.

Outflows Blocked

“It’s important to stress that it’s not a properly functioning market,” said Piotr Matys, a senior currency analyst at InTouch Capital Markets Ltd. in London. “The ruble is not a free-trading currency after Russia imposed various restrictions that essentially prevent capital outflows.”

Adding to the complexity, Putin has demanded that foreign buyers pay in rubles for Russia’s natural gas. While European officials rejected the plan when it was first announced, a French official said March 31 that the new mechanism won’t change payments as mandated in supply deals, which will continue as before.

All the moving parts mean price discovery is close to impossible.

“My focus has been limited on ruble lately purely because it is a synthetic market,” said Simon Harvey, the head of currency analysis at Monex Europe. “Once the depth comes back, pricing will look wildly different to where it is currently trading at, unless there is severe intervention or continued capital restrictions.”

©2022 Bloomberg L.P.


Ruble Nears Two-Month High, Sparks Doubt Over ‘Synthetic’ Rally

Related Articles

Dollar Down over Recession Fears
Dollar Down over Recession Fears By - Jun 27, 2022

By Zhang Mengying – The dollar was down on Monday morning in Asia over recession fears following weakening U.S. consumer confidence. The U.S. Dollar Index that tracks...

Dollar Edges Lower as Investors Weigh Powell Testimony
Dollar Edges Lower as Investors Weigh Powell Testimony By - Jun 24, 2022

By Scott Kanowsky -- The U.S. dollar slipped slightly on Friday, as investors remained cautious of the impact of tighter central bank policies around the world...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
Sign up with Email