Introduction

The Russian rouble has plummeted to its lowest level against the US dollar in over 32 months, marking a significant downturn in the currency’s value. On Wednesday, November 27, 2024, the rouble surpassed 110 against the US dollar, a level not seen since March 16, 2022, shortly after Russia’s invasion of Ukraine.

Factors Contributing to the Rouble’s Decline

Geopolitical Tensions:

The escalation of the war in Ukraine has played a crucial role in weakening the rouble.

Western Sanctions:

New sanctions imposed by the United States have further pressured the Russian currency.

Market Volatility:

Russia’s stock market has experienced a decline of over 20% this year, prompting investors to move assets from stocks to deposits.

Impact on Russian Economy

The weakening rouble has several implications for the Russian economy:

Export Benefits:

A weaker rouble could potentially benefit Russian exports by making them more competitive in international markets.

Import Costs:

However, it also leads to higher prices for imported goods, potentially exacerbating already high inflation rates in the country.

Foreign Currency Scarcity:

Sanctions targeting Russia’s financial sector have disrupted foreign trade payments, particularly in the oil and gas sectors, leading to a shortage of foreign currency in the Russian market.

Response from Russian Authorities

The Russian Central Bank has announced emergency measures in response to the rouble’s decline. Analysts anticipate potential actions from financial authorities, including:

Increased foreign currency sales by the central bank

Adjustments to the budget rule’s operational parameters

Implementation of additional capital controls

Despite these concerns, Russia’s finance minister has downplayed worries about the rouble’s decline, asserting that it would greatly benefit exports.

Conclusion

Forecasts suggest that the rouble could reach values between 115 and 129 against the dollar by the end of 2024. The currency’s performance will likely continue to be influenced by geopolitical factors, particularly the ongoing conflict in Ukraine and the impact of international sanctions on Russia’s economy.