Russian Rouble Weakens against Dollar, Reaches Symbolic Threshold of 100
October 3, 2023
The Russian rouble weakened past the symbolic threshold of 100 to the dollar before recovering slightly in early trade on Tuesday. This decline was due to foreign currency outflows and the country’s shrinking current account surplus. The last time the rouble fell into triple digits in August, the Bank of Russia implemented an emergency rate hike of 350 basis points to 12% and discussed the possibility of reintroducing controls to support the currency.
As of 0645 GMT, the rouble was 0.2% stronger against the dollar at 99.58, after hitting a low of 100.2550 in early trade. It also gained 0.6% against the euro, trading at 104.29, and remained steady against the yuan at 13.60.
Brent crude oil, which serves as a global benchmark for Russia’s main export, was down 0.5% at $90.24 a barrel. Despite this decrease, it remains well above its 2023 average.
The Russian currency often faces pressure at the beginning of each month, as it loses the support of a favorable month-end tax period that typically sees exporters convert foreign exchange revenues to meet local obligations.
Promsvyazbank analysts stated that expensive oil and an increase in the key rate are improving the rouble’s outlook in the medium-term. However, they also believe that in the absence of new support measures from the authorities, the rouble will briefly surpass 100 to the dollar.
President Vladimir Putin’s economic adviser criticized the central bank as the rouble dropped to 101.75 per dollar in August. This reflects growing internal discord, with blame placed on the loose monetary policy. According to Alexei Antonov of Alor Broker, the level of 100 is not just a technical resistance but an important psychological barrier. He believes that for now, everything points to the rouble continuing to depreciate.
Following the emergency rate hike in August, the central bank raised rates again in September to 13%. Analysts surveyed by Reuters expect the central bank to tighten monetary policy once more at its next scheduled meeting on October 27, as it grapples with persistent inflationary pressure.
The Russian rouble has experienced a tumultuous journey since Russia’s invasion of Ukraine in February 2022. It reached a record low of 120 against the dollar in March last year before recovering to a more than seven-year high a few months later, supported by capital controls and a surge in export revenue. However, falling exports due to Western sanctions and shifting trade flows, coupled with a recovery in imports this year, have caused the rouble to weaken. Russia’s current account surplus has also shrunk by 86% year-on-year to $25.6 billion in the January-August period.
Reporting by Lidia Kelly in Melbourne and Alexander Marrow in London; Editing by Kim Coghill, Stephen Coates, and Andrew Heavens
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