Rouble extends recovery toward pre-invasion levels as stocks rally on market reopening

A month after Russia sent troops into Ukraine, the country's financial markets reopened on Wednesday to a peculiar sight: the rouble climbing back toward the levels it had held before the invasion began. The currency firmed 1% to 84.30 against the dollar and briefly touched 82.56—a price last seen on February 25, the day after the military operation commenced. Against the euro, it rose 0.8% to 93.36, touching 90.73, its strongest point since February 23. The stock market, dormant for nearly four weeks, inched higher on its fifth day of trading, though the movements were sharp and sometimes bewildering.

The rouble's recovery was not the result of market forces reasserting themselves. Instead, it reflected a carefully constructed architecture of state intervention. The central bank had imposed capital controls, banned the purchase of foreign cash, and begun buying gold from banks at a fixed price of 5,000 roubles per gram. These measures created an artificial floor beneath the currency. Analysts at Otkritie Bank calculated that given current gold prices, the rouble had room to strengthen further, potentially reaching 81 to the dollar. Sberbank CIB suggested the currency could continue firming as long as the central bank maintained its grip on capital flows—a tacit acknowledgment that without these controls, the rouble would likely weaken again.

Two developments had provided the rouble some momentum in recent days. First, Russia and Ukraine held talks in Istanbul where the Russian delegation signaled it would reduce military operations around Kyiv. Second, President Vladimir Putin had demanded that European countries pay for Russian natural gas in roubles rather than euros. Europe imports roughly 40% of its gas from Russia and has historically paid in euros through the state-controlled Gazprom. European governments and the G7 rejected the demand outright, arguing that Russia had no right to unilaterally rewrite existing contracts. Yet the currency market had responded to Putin's move anyway, treating it as a potential source of rouble demand.

The stock market's reopening revealed the distortions that had accumulated during the closure. Trading volumes were far below normal. Foreign investors were barred from selling stocks and rouble-denominated bonds until April 1, a restriction that created a one-way market in which prices could move sharply without the stabilizing presence of sellers. VK, a London-listed internet company that had flagged debt servicing problems, saw its Moscow depositary receipts surge 27% on Wednesday, following a 72.3% jump the day before. Inter RAO, a state energy firm, jumped 25% after announcing dividend payments. Aeroflot, the flag carrier, rose 8.1%. The dollar-denominated RTS index climbed 5.1% to 926.9 points, while the rouble-based MOEX index gained 3.2% to 2,485.7 points. Oil major Rosneft was up 4.6%, and Sberbank, the dominant state lender, gained 3.5%.

These gains carried an asterisk. The rouble's strength rested entirely on the central bank's willingness to maintain capital controls and administrative measures. Analysts were explicit about this dependency: the moment the central bank began easing restrictions, the currency could reverse course. On the interbank market, where banks traded with each other, the rouble was quoted at 86 to 87 against the dollar—weaker than the official rate, a gap that reflected lingering doubt about the currency's true value. The stock market's volatility, meanwhile, suggested that investors were uncertain about the sustainability of the recovery. What appeared to be a return to normalcy was instead a carefully managed performance, dependent on the state's continued intervention and the absence of foreign selling pressure.