Rouble falls against dollar after Russia relaxes capital controls

After losing the backing of some capital controls and as sovereign default risk resurfaced, the Russian rouble dropped versus the dollar on Wednesday, but held at a five-year high against the euro.

Despite a full-fledged economic catastrophe, the rouble has been the world’s best-performing currency this year, aided by curbs implemented by Russia in late February to protect its financial sector after sending tens of thousands of troops into Ukraine.

The rouble was 0.5 percent lower against the dollar at 63.90 at 0741 GMT, moving away from the 62.6250 level set on Friday, which was its highest since early February 2020.

It was up 0.2 percent against the euro, trading at 66.96, close to its highest level since mid-2017, 64.9425, which it reached last week.

The rouble has lost some of its gains since the central bank boosted the cross-border transaction ceiling on Monday, allowing Russian residents and non-residents from friendly countries to send money overseas in amounts up to $50,000 per month. The prior cap was set at $10,000.

Because the central bank cannot act after the West froze roughly half of its gold and foreign exchange holdings, export-oriented enterprises are still required to convert 80 percent of their income.

On Wednesday, economists at Promsvyazbank predict the rouble to consolidate in the region of 63 to 64.5 against the dollar.

After a US administration source warned Washington was considering restricting Russia’s ability to pay its U.S. bondholders by letting a key waiver to expire next week, attention will be focused on Finance Minister Anton Siluanov’s remarks at a forum on Wednesday. This might bring Moscow even closer to default.

The Russian stock markets were rising.

The RTS index (.IRTS) rose 1.3 percent to 1,216.6 points, its highest level since February 23. At 2,466.2 points, the rouble-based MOEX Russian index (.IMOEX) was up 1.7 percent.

The spotlight on Wednesday, according to Veles Capital analysts, could be on dividend stories. MTS (MTSS.MM) stock rose over 20% after the company’s board of directors recommended a dividend of 33.85 roubles ($0.5314) per share late Tuesday.