Ruble Weakens Sharply Amid Geopolitical Tensions and Sanctions
On November 27, 2024, the Russian ruble experienced a significant decline against major currencies, with the dollar rising by 8.6% to 114.53 rubles, the euro increasing by 9% to 120.61 rubles, and the yuan climbing by 3.3% to 15.16 rubles. This marks the most severe weakening since March 2022, as reported by the TradingView platform. The Central Bank of Russia set official exchange rates for November 28 at 108.01 rubles per dollar, 113.09 rubles per euro, and 14.84 rubles per yuan.
Analysts attribute the ruble's decline to several factors, including a strengthening dollar on the global stage, heightened geopolitical tensions surrounding Russia, and the introduction of new US sanctions targeting the Russian banking sector. Notably, the US Treasury Department recently added 118 individuals and entities linked to the Russian financial sector to its sanctions list, including Gazprombank, which has historically facilitated a significant portion of Russia's export operations.
Natalia Pyryeva, a leading analyst at Tsifra Broker, explained that these sanctions complicate international settlements and exacerbate existing issues with the repatriation of export earnings. Additionally, there is a seasonal increase in demand for foreign currency from importers, further pressuring the ruble.
Economic Implications and Future Outlook
The weakening ruble presents a mixed bag of implications for the Russian economy. While it poses challenges, such as accelerating inflation due to more expensive foreign currency, it also benefits exporters. Russian Finance Minister Anton Siluanov noted that the current exchange rates favor exporters, potentially increasing revenue in rubles for goods sold abroad. This could lead to higher profits for businesses and increased budget revenues for the government.
However, the Central Bank's high key interest rate is providing some support to the ruble, creating attractive yields on ruble deposits and helping to mitigate capital outflows. Analysts suggest that the government may need to intervene if the ruble's depreciation continues, possibly by reinstating higher mandatory repatriation thresholds for foreign currency earnings and increasing the sale of yuan from the National Welfare Fund.
Despite the current volatility, analysts from BCS World of Investments believe that the fundamental conditions for the balance of payments do not support a long-term weakening of the ruble. They anticipate that as new channels for export payments are established, the exchange rate will stabilize around 100 rubles per dollar, 108 rubles per euro, and 14 rubles per yuan in the near future.
