On November 27, the Russian ruble experienced a significant decline in the international foreign exchange markets. By 4 PM Moscow time, the exchange rate of the US dollar against the ruble climbed to 114.5, marking its highest level since March 15, 2022. This was also the first time in more than a year that the rate surpassed the 114 mark.
In the interbank foreign exchange market, the US dollar gained 8.54% against the ruble. Meanwhile, the official exchange rate announced by the Russian Central Bank was also raised to 105.0604. The persistent pressure on the ruble has sparked widespread concern in the market.
Sanctions and Weak Market Confidence
Russian Finance Minister Anton Siluanov previously stated that the current exchange rate levels are more favorable for exporters, but this failed to lift market sentiment. Analysts at Saint Petersburg Bank believe that the continued impact of Western sanctions is the main reason for the ruble's depreciation. Particularly, the US Treasury's Office of Foreign Assets Control's recent further sanctions on Russia's financial sector, including cutting financial ties with Gazprombank, have severely impacted market demand and supply.
Moreover, increased budget spending at the end of the year and robust consumer demand ahead of the festivities have further pushed up the demand for foreign exchange, adding pressure on the ruble exchange rate. Dmitry Babin, an expert from BCS Global Markets, pointed out that insufficient foreign exchange inflow, the financial impact of sanctions, and falling oil prices are key factors in the ruble's current weakness.
Central Bank Halts Currency Purchases to Mitigate Volatility
To address market volatility, the Russian Central Bank announced a halt to currency purchases on the domestic foreign exchange market starting November 28 to support the Ministry of Finance in implementing budget rules, while continuing to sell 8.4 billion rubles of foreign exchange daily to stabilize the market. The Central Bank indicated that the resumption of purchases would depend on financial market conditions, with deferred purchases scheduled for 2025.
This move by the Central Bank is seen by the market as a supportive measure for the ruble. Sovcombank's Chief Analyst Mikhail Vasiliev stated that these measures could somewhat ease the depreciation pressure on the ruble. However, he also noted that the sale amount might have limited actual impact on the exchange rate.
Stronger Intervention Measures May Be Implemented
Experts widely predict that as the ruble continues to weaken, the Russian government and Central Bank may take more measures, including restricting capital outflows, requiring exporters to repatriate foreign exchange earnings, and directly intervening in the currency market. Ruslan Dainzhiev, an analyst at Alfa Capital Management, believes that if these policies are properly executed, they could potentially reverse the ruble's decline.
Market Outlook Remains Uncertain
Analysts point out that the short-term trajectory of the ruble's exchange rate still depends on international oil prices, the extent of sanctions, and subsequent policies of the Central Bank. Under the current sanctions scenario, it is challenging for the ruble to rebound. Whether regulatory bodies can stabilize the market through a series of intervention measures will be a key focus in the coming period.
