The Russian ruble continues to weaken against the US dollar and the Chinese yuan. It has fallen by more than 24% since the beginning of August, marking the start of its decline, and may continue to drop further.
This is reported by RBK-Ukraine citing Reuters. Reports are also available from Kontrakty.UA.
On November 27, the ruble decreased by 0.86% to 106.40 against the dollar. It fell by 0.51% to 14.74 against the yuan, which is also the lowest level since March 2022, the first month of Russia's invasion of Ukraine.
The decline of the ruble is exacerbated by a more than 20% drop in the stock market since the start of the year, as investors shift their savings from stocks to deposits offering interest rates above the Central Bank's base rate of 21%.
"The market is awaiting a response from financial authorities regarding the ruble's devaluation," stated analysts from the brokerage firm BCS, emphasizing that currency purchases "resembled panic amid uncertainty."
The ruble's decline fuels inflation, which is expected to exceed the Central Bank's forecast for this year, contradicting the painful tightening of monetary policy by the regulator, with the base interest rate at its highest level since 2003.
According to the Central Bank's estimates, a 10% depreciation of the ruble adds 0.5 percentage points to inflation, meaning that the four-month decline in the ruble could contribute an additional 1.5 percentage points to the current inflation rate.
"For the central bank, this is a challenging task in combating rising prices," believes economist Yevgen Kogan.
Forecasts for Decline
Many analysts predict that by the end of the year, the ruble's exchange rate could reach 115-120, with some urging the government and the central bank to take measures, such as forcing exporters to sell more currency and reducing the state's currency purchases.
Analysts note that the ruble's decline has been intensified by new sanctions on Russia's financial sector, which have disrupted foreign trade payments, especially for oil and gas, leading to a physical shortage of currency in the Russian market.
CBR Rate
It is noteworthy that the Central Bank of Russia raised the key interest rate by 2 percentage points, marking the highest level since February 2003.
The Central Bank of Russia identified high inflation expectations and deviations of the Russian economy from a balanced growth trajectory, as well as deteriorating external trade conditions, as the main inflation risks.
The Ministry of Finance expects an additional expenditure of 1.5 trillion rubles (15.5 billion dollars) beyond the budget plan for the remaining part of the year, as it seeks to cover additional military needs.