Russian Rouble Benefited from a Biden-Putin Phone Call

The Russian rouble climbed to a two-week high on Wednesday after a phone call between U.S. President Joe Biden and his Russian counterpart Vladimir Putin helped to address fears of imminent new sanctions. At 09:03 GMT the Russian currency gained 0.4% to 75.63 against the dollar after reaching 75.4525, its best result since March 31.

The rouble got a boost after Joe Biden proposed to Vladimir Putin that they hold a summit to tackle various issues. The market took Biden’s proposal to meet with his Russian counterpart as a sign of de-escalation.

Two U.S. warships are due to arrive in the Black Sea this week in response to Russia’s recent actions. Tensions over Eastern Ukraine pushed the Russian currency down to five-month lows over the last few weeks.

The rouble is likely to trade within a range of 75.30-76.40 in the coming days according to the VTB Capital. However, the geopolitical situation has the potential to affect the currency. Interestingly, the Russian currency decoupled recently from moves in other emerging markets and the price of crude oil.

The oil industry is very important for the Russian economy, as it is the country’s main export. Its price climbed 1.7% higher to reach $64.74 a barrel, buttressing Russian stock indexes. The dollar-denominated RTS index reached 1,486.5 points. Moreover, the rouble-based MOEX Russian index was 1.2% higher at 3,567.3 points, moving towards an all-time high of 3,602.18 it touched in mid-March.

Shares in Gazprom outperformed the market by adding 1.5% after the company’s statement. The gas giant stated that it was considering paying half of its 2020 net profits in dividends. 

Rouble and other emerging currencies

The rouble also strengthened its position against another major currency the euro. It was up 0.3 at 90.46 after reaching 90.2725, its best result since April 6.

Falling global bond yields helped to boost emerging market currencies and stocks on Wednesday. The MSCI index of emerging market currencies gained 0.4%, with the dollar reaching three-week lows after an uptick in the U.S. inflation did not trigger wider fears about rising inflation. Another factor was the U.S. Federal Reserve’s decision to lower U.S. bond yields. Higher U.S. bond yields affected emerging market currencies and debt in 2021.

In Europe, the Middle East, and Africa, Turkey’s lira gained 0.5% despite Ankara’s announcement. The government announced a fresh round of virus-related curbs.

The Polish zloty outperformed its central European peers after the country marked a robust current account surplus in February.