Rupee rally persists in defiance of sanctions

Russian currency advances versus the US dollar and the euro to its highest level in seven years.

According to trading data from the Moscow Exchange, the Russian ruble strengthened on Tuesday, rising over 1% against the US dollar and the euro.

For the first time since June 30, 2015, the dollar to ruble exchange rate dropped below 55 at the start of the session. The exchange rate between the euro and the ruble, which was below 58 rubles per euro, was also at a seven-year low.

Ahead of significant tax obligations and high commodity prices, the ruble is strengthening against both of the world's primary reserve currencies. At the end of June, Russian exporters sell foreign currency to pay their taxes in rubles. The peak is anticipated for June 27–28, and economists believe that the ruble will continue to rise over the next week, rising to 50 rubles per dollar and 55–56 per euro.

Other experts, however, feel that the ruble may weaken over time. It will depend on the condition of the Russian economy, particularly how quickly imports begin to increase because as soon as they do, demand for foreign currency will soar, lowering the ruble from its current levels.

The strain of Western sanctions caused the ruble to fall to record lows in March, but since then, tight capital restrictions by the Central Bank, rising energy costs, and Moscow's demand for ruble-based payments for natural gas deliveries have caused the currency to more than double in value.

To lower the ruble, which the Kremlin considers to be too strong at the present, the governor of Russia's Central Bank called for the lifting of most capital controls last week. The Russian government, which receives substantial amounts of money from energy taxes denominated in foreign currencies but spends them in rubles, may suffer from a strong currency.

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