Moscow – The Russian ruble fell to a 32-month low against the US dollar today, breaking above 110 rubles per dollar. Since the beginning of August, the ruble has fallen by more than 24 percent against the dollar and is now trading around 113 rubles per dollar, Reuters wrote. Thus, the ruble reached a threshold against the dollar, which, according to some analysts, could prompt the authorities to take measures to support the domestic currency. In response, Russia’s central bank announced it would stop foreign exchange interventions on behalf of the finance ministry by the end of the year to ease market volatility.
The decline of the ruble caught economists by surprise, who estimated at the beginning of November that the ruble would reach 100 per dollar within a year.
The decline of the ruble is also accompanied by a decline in the stock market, which has lost more than 20 percent this year. Investors are moving their savings from stocks to deposits that offer interest higher than the central bank’s current prime rate. It amounts to 21 percent.
Analysts now expect the ruble could trade for between 115 and 120 rubles to the dollar by the end of the year. Some are calling on the government and the central bank to take measures such as forcing exporters to sell more foreign exchange and increasing government sales of foreign exchange.
The fall in the ruble is supporting inflation, which should exceed the central bank’s forecast this year. The central bank estimates that a ten percent weakening of the ruble increases inflation by 0.5 percentage points. This means that the current four-month decline in the ruble could increase inflation by 1.5 percentage points.
According to analysts, the fall of the ruble was aggravated by new sanctions against the Russian financial sector, which disrupted payments in foreign trade. Most major Russian banks are now subject to US sanctions. Thus, banks cannot carry out banking transactions in dollars. The only way to get dollars is to import them in large quantities as cash.
After Western sanctions were imposed on Moscow’s MOEX exchange, all trading in dollars and euros moved to the over-the-counter market. This has made trading unstable and opaque. Most banks only release data to regulators.
Many analysts point out that, apart from a new round of tensions with the West over Russia’s military action in Ukraine and new financial sanctions, there are no major reasons for the decline. The price of oil, Russia’s main export, is essentially stable.
Russian Finance Minister Anton Siluanov said the weak ruble is beneficial for exporting companies. The prices of Russian energy exports are mostly set in dollars. It also helps the Russian government increase state budget revenues from energy taxes and export duties.
Russia stock exchange ruble foreign exchange
Source: www.ceskenoviny.cz
