Russian Ruble Hits 13-month Low

The Russian ruble weakened past 100 per USD, the lowest in over one year, tracking the declines in other Russian assets following the aggressive escalation in the war against Ukraine.

President Putin updated the country's doctrine to expand scenarios that warrant the use of atomic weapons in the same morning that Ukraine fired at Russian territory with US-supplied missiles for the first time since the start of the war.

The developments added to pressure on the ruble amid the relaxation of capital controls by the Russian government as a weaker currency aids the Kremlin’s ability to finance its budget.

Moscow eased mandatory conversion further to 25% of revenues for top export businesses, compared to 80% of revenues from earlier in the year, significantly reducing demand for rubles.

Further, the ruble was also pressured by the pessimistic outlook of the Chinese economy, limiting expectations of foreign demand for Russian goods.

The Russian ruble weakened toward 100 per USD, the lowest in over one year, pressured by a strong dollar after the election of Donald Trump for US President and the gradual relaxation of capital controls by the Russian Federal government.

Poor access to foreign exchange markets for Russian export-oriented companies was magnified by sanctions on the Moscow Exchange, increasing the difficulty for firms to secure foreign exchange to execute operations and reconvert their revenues back to rubles.

Consequently, the Federal government eased mandatory conversion further to 25% of revenues for top export businesses, compared to 80% of revenues from earlier in the year, significantly reducing demand for rubles.

Further, the ruble was also pressured by the pessimistic outlook of the Chinese economy, limiting expectations of foreign demand for Russian goods.

In the meantime, the CBR hiked its key rate to a record of 21% in October as inflation expectations continued to increase.

The Russian ruble weakened past 100 per USD for the first time in over one year in early November, as dollar strength after the presidential election of Donald Trump in the US magnified pressure from the gradual relaxation of capital controls by the Federal government.

Payment difficulties for Russian export-oriented companies were magnified by sanctions on the Moscow Exchange, increasing the difficulty for firms to secure foreign exchange to execute operations and reconvert their revenues back to rubles.

Consequently, the Federal government eased mandatory conversion further to 25% of revenues for top export businesses, compared to 80% of revenues from earlier in the year, significantly reducing demand for rubles.

Further, the ruble was also pressured by the pessimistic outlook of the Chinese economy, limiting expectations of foreign demand for Russian goods.

In the meantime, the CBR hiked its key rate to a record of 21% in October as inflation expectations continued to increase.

USDRUB increased to a 12-month high of 100.41.

Over the past 4 weeks, US Dollar Russian Ruble gained 2.04%, and in the last 12 months, it increased 6.58%.

The Russian was weaker than 96 per USD, remaining close to the one-year low of 97.5 from October 16th as pressure from the gradual relaxation of capital controls by the Federal government offset the impact of a hawkish Bank of Russia.

Payment difficulties for Russian export-oriented companies were magnified by sanctions on the Moscow Exchange, increasing the difficulty for firms to secure foreign exchange to execute operations and reconvert their revenues back to rubles.

Consequently, the Federal government eased mandatory conversion further to 25% of revenues for top export businesses, compared to 80% of revenues from earlier in the year, significantly reducing demand for rubles.

Further, the ruble was also pressured by the pessimistic outlook of the Chinese economy, limiting expectations of foreign demand for Russian goods.

In the meantime, the CBR hiked its key rate to a record of 21% in October as inflation expectations continued to increase.

The Russian ruble weakened beyond 91 per USD, nearing new four-month lows, as traders assess the economic and monetary outlook.

The Bank of Russia raised its key interest rate by 100bps to 19% in its September meeting and left the door open for another hike in October.

Policymakers also revised their inflation forecasts for Russia higher to 6.5%-7% for the year.

It currently stands at 9.1%.

The spike in inflation is largely attributed to the economic strain from increased government military spending, which has driven up wages and outpaced the economy’s capacity to supply goods and services.

Central Bank Governor Elvira Nabiullina recently cautioned about the risk of stagflation, amid persistent inflation and slowing growth in the country.