The Rouble Rose As Russia stated Troops Return To Their Post

On Tuesday, the rouble gained more than 2% against the dollar after Russia announced some troops near Ukraine were returning to their barracks following military drills, alleviating fears of an invasion that had fueled a sell-off of Russian assets last week.

After days of threats from the United States and the United Kingdom that Moscow may attack its neighbor at any time, Russia’s announcement that it was pulling some military from near the border helped the currency, equities, and bonds recover. Russia has denied invading Ukraine on several occasions. On the ground, NATO said it had yet to detect any signs of de-escalation.

The rouble was 2.1 % firmer versus the dollar at 75.15 at 1252 GMT, close to recouping all of the losses suffered in the currency’s worst single-session plunge in over two years on Friday. The rouble rose 1.7 % to 85.28 against the euro. In a note, Sberbank CIB wrote, “Market mood is exceedingly fragile, therefore volatility is certain to remain strong.”

A Single Sentence Can Move Rouble

The ruble rose on Monday as Russian Foreign Minister Sergei Lavrov proposed to President Vladimir Putin that Moscow should continue to pursue security guarantees from the West through diplomatic channels. The currency’s reaction to those statements, according to Dmitry Polevoy, head of investing at Locko Invest, demonstrated that a single sentence may move the rouble dramatically in either way.

The parliament’s vote to appeal to Putin to recognize two Russian-backed separatist areas in eastern Ukraine as independent may hamper the currency’s upward trajectory. The recognition of the two districts might jeopardize the ongoing Minsk peace process in east Ukraine, to which Russia has pledged its support.

After a sell-off in the previous two days, Russian market indices were higher. The RTS index, which is denominated in dollars, increased by 5.6 % to 1,505.1. The MOEX Russian index, which is based on the rouble, was up 3.1 % at 3,590.9. After the firm published full-year results and indicated it expects $6.5 billion in sales in 2022, shares of internet behemoth Yandex (NASDAQ: YNDX) surged 7.5 %, exceeding the market.