The Ruble’s Depreciation Likely to Stabilize as Increased Sales Will Generate Forex Surplus
Russian presidential adviser Maksim Oreshkin stated during the Eastern Economic Forum (EEF) in Vladivostok that the depreciation of the Ruble has reached its lowest point, and he expects a surplus of foreign currency to enter the local market in the coming months. Oreshkin mentioned that the market has already passed its peak values due to larger amounts of forex revenue from higher export commodity prices and a decrease in import levels. Furthermore, he emphasized that the effects of the key rate increase and macroprudential policy tightening will contribute to the surplus. Oreshkin is confident that the central bank possesses the necessary tools to restore stability to the currency in the near future and reassured that the Ruble’s depreciation does not pose a risk to Russia’s financial stability.
The Central Bank of Russia (CBR) recently raised its key rate by 350 basis points to 12% during an extraordinary board meeting in August, citing increasing inflation as the reason. This rate adjustment came after several consecutive meetings where the rate had remained unchanged since October of the previous year. Deputy Chairman of the CBR, Aleksey Zabotkin, explained that fluctuations in the trade balance had weakened the Ruble. Zabotkin also warned that significant pro-inflationary risks remain and did not rule out the possibility of another rate hike during the board meeting scheduled for September 15.
The anticipation of increased forex revenue and the central bank’s active approach in managing the Ruble’s stability provides hope for a turnaround in the currency’s performance. The Russian government is optimistic that the Ruble will stabilize and possibly strengthen against major international currencies. The surplus of foreign currency in the local market is expected to contribute to a rebound in the Ruble’s value, which is crucial for the country’s economic stability. Exporters, benefiting from higher export prices, will play a crucial role in supporting the Ruble’s recovery. The increased sales of hard-currency revenues by exporters will inject more foreign currency into the market, helping to balance the Ruble’s value against other currencies.
The Russian economy heavily relies on exports, particularly commodities such as oil and gas. These commodities are traded in US dollars, making the value of the Ruble vulnerable to fluctuations in the global energy market. Therefore, any positive news regarding the Ruble’s stability is welcomed by Russian exporters and investors. A strong Ruble is advantageous for export-focused industries as it lowers the cost of imports and increases the purchasing power of foreign buyers. Additionally, a stable Ruble reduces currency risk, making it more attractive for foreign investors to invest in Russian assets.
It is crucial to monitor the development and progress of the Ruble in relation to the news of increased forex revenue and the central bank’s actions. The government’s focus on stabilizing the currency ultimately aims to bolster the country’s economy and strengthen its position in the global market. If the Ruble stabilizes and begins to strengthen, it can have a positive impact on various sectors, leading to increased economic growth and stability in Russia. Investors and market participants will be eagerly awaiting the outcome of the upcoming board meeting on September 15, as it will provide crucial insights into the central bank’s future strategies and its impact on the Ruble’s performance.