The Russian ruble fell to 100 per dollar. And it seems that this time the Russian authorities have reconciled themselves and will allow him to reach the level that previously caused a harsh political reaction.
Weakening the ruble to 100 per dollar is no longer a concern for Russian authorities, as it could prove beneficial for the state budget amid planned spending increases next year, Russian officials said. . The Russian authorities are ready to allow the ruble exchange rate to reach 100 per dollar. Bloomberg wrote this on Tuesday, October 15.
The Russian ruble fell to 100 per dollar. And it seems that this time the Russian authorities have reconciled themselves and will allow him to reach a level that previously caused a harsh political reaction.
A weakening ruble is not a concern for now and will benefit Russia’s state budget amid plans to increase spending next year, two anonymous sources with knowledge of the matter said.
The Bank of Russia has relied on interbank transactions to calculate the ruble’s exchange rate since the Moscow Exchange stopped trading in dollars and euros after the United States imposed sanctions on the group in June. Punitive measures have exacerbated foreign currency shortages, and central bank data show the ruble is about 9% weaker. The deadline for companies wanting to exit trades on the exchange expired on October 12.
“In the current situation, 100 rubles per dollar is not scary, although it has a certain inflationary effect,” said Oleg Vyugin, a former high official at the Bank of the Russian Federation.
The ruble also weakened over the same period against the Chinese yuan. The Russian currency fell 11% against the yuan on the Moscow Exchange to 13.26, the weakest since May.
Last year, the ruble broke through 100 to the dollar twice. The central bank responded by raising its key interest rate by 350 basis points at an extraordinary meeting in August. Subsequently, in October, the Russian government introduced stricter capital controls, requiring 43 exporter groups to repatriate 80% of their foreign currency earnings and sell almost all of them for rubles in the domestic market.
According to forecasts from the Russian Ministry of Economy, the Russian government is planning a weaker currency: officials expect the average rate to be 96.5 rubles per dollar in 2025, compared to 91.2 rubles this year.
The recent weakening of the ruble reflects difficulties in foreign trade payments faced by importers and exporters, said Dmitry Polevoy, investment director of the Moscow company Astra Asset Management.
With the threat of a second US sanction looming in June against the banks of Russia’s main trading partners, businesses are facing increasing payment difficulties.
The Russian government responded by easing measures supporting the ruble. Mandatory conversion of export proceeds was split – from 50% to 25%. This followed decisions to reduce the income repatriation requirement to 60% in June, and then to 40% a month later.
According to the Bank of the Russian Federation, in September, foreign currency sales of Russia’s largest exporters fell by 30% compared to the previous month due to an increase in the share of payments in rubles.
After the start of the war, the ruble weakened to around 120 per dollar, but recovered as the central bank immediately raised the key rate more than twice – up to 20%.
The rate is now back at 19% and could return to its peak next week as the central bank seeks to cool Russia’s overheating war economy and curb runaway inflation.
According to the forecasts of Natalia Milchakova, an analyst at Freedom Finance Global in Kazakhstan, the bank will have to rely on monetary policy to compensate for the associated losses from the weak ruble in the form of high inflation.
As you know, by the end of 2023, Russia’s budget deficit will be 3.24 trillion rubles, or 1.9% of the country’s GDP. This is almost twice as bad as the figure predicted by Putin.
Source: korrespondent
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