Russian Ruble Slips on Higher Producer Prices, Capped by Energy Rally

The Russian ruble weakened against its US peer on Tuesday as higher producer prices and weaker industrial production weighed on the currency. The ruble has recorded modest gains against the greenback, driven by rising energy prices and broader optimism in the nation’s economic recovery.

According to the Federal State Statistics Service, the producer price index (PPI) advanced 6.7% year-over-year in January, marking the fourth consecutive month of higher producer prices. This also represented the largest increase in the annualized PPI since May 2019, driven by manufacturing and mining. But inflation in utilities eased.
On a monthly basis, producer prices jumped 3.5% last month, up from 1.5% in December.
The statistics agency reported on Monday that industrial production slumped at an annualized rate of 2.5% in January, following a 2.1% boost to finish the year. Output contracted for manufacturing and raw materials extraction. Utilities production surged faster.
Industrial output plummeted 21.1% on a monthly basis in January, down from a 13% gain in December.
Later this week, the gross domestic product (GDP), retail sales, and unemployment data will be released.
The ruble has found support on soaring energy prices this year. Brent crude oil has soared about 20% so far in 2021, topping $60 a barrel. Natural gas prices have also climbed roughly 20%, surpassing $3 per million British thermal units (btu). The energy sector is critical to the Russian economy, maintaining a vast reservoir of oil and natural gas supplies.
On the coronavirus pandemic front, Russia has seen a noticeable decline in COVID-19 infections, with the seven-day average falling from more than 28,500 to just above 14,000. In total, Russia has reported 4.04 million cases, with a death toll of nearly 80,000.
Financial analysts are bullish on the Russian economy as the government continues to roll out its coronavirus vaccine, forecasting considerable growth in the economy and the ruble.
In other news, the Russian government announced that a permanent floating duty on wheat exports would go into effect on June 2. Moscow first introduced a tax on wheat shipments to curb domestic prices. After food inflation failed to subside, officials expanded and extended the levy, only for grocery prices to remain high. Industry observers are warning that wheat prices could increase even with an export penalty since it would discourage farmers from producing more wheat.
The USD/RUB currency pair rose 0.65% to 73.7819, from an opening of 73.3325, at 15:55 GMT on Tuesday. The EUR/RUB advanced 0.46% to 89.32, from an opening of 88.93.
If you have any questions, comments, or opinions regarding the Russian Ruble, feel free to post them using the commentary form below.

Original from: www.earnforex.com