The Russian ruble plummeted after Russia invaded Ukraine last February. Initially, the government took a hands-off approach to the currency’s roller coaster swings. Instead, they tout the country’s economic resilience in the face of sanctions and shrinking exports. But by August they had to step in as the ruble plummeted to a 16-month low, worth less than a penny.
On a recent Tuesday, the ruble briefly fell below the 100 mark against the dollar, the key benchmark for the Russian currency, and it was a familiar sight. Although the ruble recovered slightly, the embarrassing decline highlighted its shaky foundations and raised concerns about further depreciation.
The ruble’s value has suffered sharply this year, depreciating nearly 30% against the dollar since January.
Many factors may have influenced the decline in the exchange rate – from foreign exchange outflows and a drop in trade activity to a reduction in Russia’s current account surplus.
But some factors may still work in Russia’s favor, such as its budget.
A weaker ruble means every dollar earned from trading oil or other products is worth more Russian currency.This in turn gave Kremlin For example, putting more money into military or social programs to help offset the impact of sanctions.
While the ruble’s weakness appears to have upside and the Kremlin has moved quickly to stem its negative impact, the value of the Russian currency is not out of the woods yet.
August slump
In August, when the ruble fell above 100 to the dollar, the Russian central bank said “Special meeting”, then raised interest rates by 350 basis points to 12%. The bank also said it would stop buying foreign currency in the domestic market by the end of the year. Stablize its financial markets.
Russian state media and senior officials are also uneasy about the ruble’s drop to triple digits. Vladimir Solovyov, a popular Russian television personality and an ally of President Vladimir Putin, said the country had become a laughingstock and noted how serious the situation had become.
Putin’s economic adviser Maxim Oreshkin told state-run news media TASS “Easy monetary policy” caused the ruble exchange rate to fall and increased inflation.
“The weak ruble complicates the restructuring of the economy and has a negative impact on people’s real income. A strong ruble is in the interests of the Russian economy,” Oleshkin said, according to a translation of an August column exist TASS.
In September, the central bank once opposed raising interest rates to 13% in response to the devaluation of the ruble and stubborn inflation. 5.33% then. Further interest rate hikes are expected at the next central bank meeting later this month.
ruble Already shaken Significant increase since 2022 – the number hit a record low shortly after Russia invaded Ukraine 120 rubles dollar, but by June last year the currency had recovered to nearly 50 rubles When oil and gas prices surge, the dollar loses value.
Alexei Antonov of Russian investment group Alor Broker said: “This level (100) is not a technical resistance, but an important psychological barrier.” told Reuters. “At the moment, everything points to the continued depreciation of the ruble.”
The ruble’s current weakness may be temporary, but the Russian government faces fiscal pressures as well as the long-term effects of a weak currency.Plunging export volumes continue to weigh on economy current account surplus From January to August, it fell 86% year-on-year to US$25.6 billion. Rising consumer prices and a depreciating ruble have made it harder for ordinary Russians to afford basic goods.
As Moscow struggles to keep its currency strong while dealing with other macroeconomic challenges, experts say the ruble’s decline is not exactly an economic crisis, although it does serve as a wake-up call for the government.
“This is the closest we’ve come to a real economic problem since the war started,” said Janis Krueger, an expert on the Russian economy at the German Institute for International and Security Affairs. Associated Press The ruble fell to a 16-month low in August. “In Russia, the exchange rate is always considered the most important indicator of the health of the economy.”
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