The Russian ruble has climbed to its highest level since last summer as the economy continues to recover from the coronavirus pandemic and markets predict the central bank will raise interest rates to tame them rising inflation.
The ruble traded below 72 against the US dollar on Wednesday morning in Moscow for the first time since July 2020. At 87.7, the Russian currency was also at its strongest level since March against the euro.
The rally for the currency comes as a plethora of economic indicators suggest that the Russian economy is on the verge of reaching its pre-coronavirus size. Consumer spending in April was 5% higher than in the same month of 2019, industrial production was also stronger, unemployment fell and business confidence remained high.
“The Russian economy could reach pre-coronavirus levels this month or next,” said Artem Zaigrin, chief economist at Sova Capital.
Rising inflation and the expectation of further interest rate hikes by the country’s central bank have also pushed the ruble higher. Russia’s inflation rate reached 6% in May – the highest since 2016 and well above market expectations. That overshoot leaves the regulator poised to hike rates from 5% to 5.5% when it meets on Friday, analysts say.
Traders are also keeping an eye on next week’s Geneva summit between Russian President Vladimir Putin and his US colleague Joe Biden. The meeting, scheduled for June 16, is the first time the two heads of state and government have met since Vice-President Biden’s visit to Moscow in 2011.