The Russian ruble recovered some ground on Tuesday after slipping past the psychological level of 100 per dollar for the first time in more than seven weeks, amid persistent pressure from foreign currency demand and a shrinking current account surplus.
The ruble, which has been on a downward trend since Russia’s invasion of Ukraine in February 2022, weakened to as low as 100.255 against the greenback in early trade, before regaining some strength to trade at 99.41, down 0.4% on the day1.
The currency’s last breach of the triple-digit mark in August triggered an emergency interest rate hike by the central bank to 12% and sparked a debate among policymakers over possible capital control measures to support the exchange rate.
The Bank of Russia, led by Governor Elvira Nabiullina, has opted to rely on monetary policy rather than administrative measures to stabilize the ruble, raising its key rate again to 13% in September and suspending foreign currency purchases for the rest of the year2.
Nabiullina has also warned against splitting the foreign exchange market into onshore and offshore segments, as suggested by Economy Minister Maxim Reshetnikov, saying it would create distortions and inefficiencies2.
The Finance Ministry, which advocated for stricter capital controls in August but faced opposition from the central bank, has limited its actions to recommending exporters to sell more of their foreign currency revenues, without imposing any obligations2.
The ruble’s decline has been driven by a combination of factors, including falling exports due to Western sanctions and shifting trade flows, a recovery in imports as the economy rebounds from the pandemic-induced recession, and higher demand for hard currency from households and businesses.
Despite the ruble’s weakness, Russia still enjoys high oil prices, which have averaged above $90 per barrel this year. Brent crude oil, a global benchmark for Russia’s main export, was down 1.1% at $89.70 a barrel on Tuesday, but still well above its 2023 average1.
Analysts polled by Reuters expect the central bank to tighten monetary policy again at its next scheduled meeting on Oct. 27, as it also faces stubborn inflationary pressure. The annual consumer price inflation rose to 9.8% in September, well above the central bank’s target of 4%3.