The Russian ruble has weakened past the significant threshold of 100 to the US dollar, reflecting foreign currency outflows and changes in the trade balance. This is the first time since August 14 that the ruble has traded at this level. Although the ruble recovered slightly to trade just above 99 to the dollar, it experienced a slight gain against the euro after hitting a low of 104.6.
The depreciation of the ruble has been attributed to a surge in demand for foreign currency, coupled with insufficient supply within the country. Importers’ demand for foreign currency has contributed to this high demand. Additionally, changes in Russia’s trade balance have played a role in weakening the ruble.
Investment strategist, Aleksandr Bakhtin, highlighted the impact of the end of the tax period, speculative issues, and reduced liquidity due to holidays in China from October 2 to 6, further exacerbating the situation. Bakhtin projected that the ruble could stabilize at around 95-96 against the dollar within a month. He also anticipated that the ruble could strengthen to 90 by the end of autumn. Bakhtin also emphasized that the recent key rate hikes by the Russian central bank could gain momentum in the near future.
On August 15, the Russian central bank raised the key interest rate from 8.5% to 12%, following a previous interest rate hike. This marked a change from several consecutive meetings where the rate remained unchanged since October of the previous year. The central bank has stated that the depreciation of the ruble does not pose a risk to Russia’s financial stability. Maksim Oreshkin, President Vladimir Putin’s economic advisor, expressed his confidence in the ruble stabilizing and reassured that the central bank possesses the necessary tools to address the issue.
The situation with the Russian ruble indicates the challenges faced by the country’s currency market. The strong demand for foreign currency and changing trade balance underscore the need for measures to stabilize the ruble. The central bank’s rate hikes demonstrate its commitment to managing the situation and maintaining financial stability within the country.
It is important to closely monitor the developments in Russia’s economy and the impact on its currency. The ruble’s performance has implications not only for domestic stability but also for international economic relations. As the situation evolves, it will be essential to assess the effectiveness of the measures taken by the central bank and the overall resilience of the Russian economy.
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