The rouble rebounded sharply!The US, however, insists that sanctions are working and “threatens” to increase them

2022-06-04 0 By

After hitting a low of 150 against the dollar in early March, the rouble has gradually strengthened against the dollar.On Friday, the ruble was trading at about 86 to the dollar in the interbank market, close to levels last seen on Feb. 23, the day before the conflict with Ukraine began.In response, the United States said that despite the rouble’s rebound against the dollar, western sanctions against Russia were still having an effect.In an interview with reporters, a senior Treasury official said the Biden administration believed the real value of the ruble had been severely impaired because of soaring inflation in Russia and the currency’s decline on the black market.Economists attributed the rebound in the interbank market to Russia’s tight currency controls.The controls do not allow Russians to transfer money to foreign bank accounts or take large amounts of cash out of the country.At the same time, banks and brokers are banned from trading cash in dollars and euros.However, the rouble could not function as a convertible currency after sanctions caused imports of goods and services to plummet, leaving businesses and consumers largely unable to buy products on international markets and travel abroad.Inflation in Russia has risen 6 per cent in the past three weeks and western central bank sanctions have prevented the country from spending half its foreign exchange reserves, cutting off the buffer channel it had built to cushion the impact, the finance ministry official said.John Shamotta, chief market strategist at Corpay, says: “The message in the currency is different from the message in any other major economy.Russia is now a one-way valve: money flows in, but not out.Over time, this will force the exchange rate up.On the black market, the dollar was trading between 110 and 140 rubles.So the cost to citizens who want to buy dollars or euros is much higher than what we see in the interbank market.”In a call with reporters, Treasury officials said the United States believed it would be able to expand sanctions in the future as the European Union continued to reduce its dependence on Russian energy imports and other raw materials.He said the US sanctions would minimise any negative impact on global supply chains.