The ruble rallied powerfully on Tuesday, returning nearly to its level a month ago. Going forward, we have to watch for specific risk events besides military ones: external debt default could easily be one candidate, which can quickly reverse the trend of the currency again, economists at Commerzbank report.

Russia could dictate at any time that debt repayments will only be made in ruble

“The Russian leadership could dictate at any time that debt repayments will only be made in ruble, which will tantamount to a default. In view of such significant upcoming risks, we see the ruble rally as part of routine volatility and do not expect a sustainable recovery to pre-war levels at all.”

“How precisely the conversion to ruble will occur – either foreigners will supply Russia’s gas company with FX directly, or foreigners will supply FX to some bank or payment system, which will make rubles available – can potentially have some ‘frictional’ impact on ruble demand, but probably not much more.”