USD/RUB prints lowest low since March 2 on Ukraine / Russian peace talk hopes

At the lows of 96.657, the Russian ruble printed the strongest level on Thursday since the lows of March 2 at 96.399 vs the US dollar. USD/RUB is currently trading at 106.429 and is down some 12.5% at the time of writing.

Russia was due to make $117m in interest payments to investors on two dollar-denominated bonds on Wednesday and as such, credit ratings agencies have warned that a debt default is "imminent".

However Russia's finance minister said the interest owed had now been paid and was waiting clearance in the US banking system, the BBC reported.

Anton Siluanov said: "We have the money, we have made the payment, now the ball is in the court, primarily, of the American authorities."

So, for now, it remains unclear whether today's deadline for making the interest payments has been met or not.

However, while payments totaling $117m may not occur immediately (a technical default would still leave the issuer with a 30-day grace period to rectify), the government has anticipated that they mean to pay in rubles in substitution of dollars, analysts at TD Securities explained.

''Also, it is not clear whether the money will be made available on local Russian accounts, or paid directly to foreign custodians' accounts, an exemption from a ban on RUB payments abroad. A missed payment and risk of a fully-fledged Russia default would likely worsen market sentiment, and possibly spill over into other markets.''

Meanwhile, there are some signs of a compromise between Ukraine and Russian negotiators, despite no signs of de-escalation, which has lifted the risk appetite in global financial markets and the ruble. 

The Financial Times published a ‘15-point plan’ that was allegedly close to being agreed upon that included Ukraine being a neutral state like Switzerland or Austria and having security guarantees from the US, UK, and Turkey.

However, as analysts at Rabobank said, ''this was then almost immediately rejected by Ukraine. Indeed, a spokesperson said that plan reflected only the Russian position.''

Moreover, the analysts highlighted troubling tones and rhetoric from Russia's president, Vladimir Putin, who gave a national speech.

''He claimed Russia was ‘being cancelled’ and spoke of “fifth columns”  and “national traitors” who “cannot do without oysters, foie gras, and gender freedoms,” who “by their very nature are located exactly there, not here, not with our people, not with Russia. This is, in their opinion, a sign of belonging to a higher caste, a higher race. Such people are ready to sell their own mother… The collective West is trying to split our society, speculating on the combat losses, on the socio-economic sanctions… and there is only one goal… the destruction of Russia. But I am convinced that… the Russian people will be able to distinguish true patriots from scum and traitors and simply spit them out like a midge that accidentally flew into their mouths. Spit them out on the pavement. I am convinced that such a natural and necessary self-purification of society will only strengthen our country, our solidarity, cohesion, and readiness to respond to any challenges.”''

''Does this sound like a man looking to deescalate, or one who is going to double down to get better terms?,'' Rabobank questioned, pointing to darker days to come for both the ruble, financial markets and world peace in general.