What is happening with Russian ruble?

What is happening with Russian ruble?

Several economic occasions happened after Russia’s invasion of Ukraine. Let’s look through them.

  • Russian ruble became the most volatile currency globally, betting Turkish lira. After Putin announced recognizing DPR and LPR on February 23 and special military operation on February 24, the Russian currency shed 7.9% of its value to 87.52 against the dollar, having earlier hit a record low of 89.60 in highly volatile trading. A rapidly depreciating currency makes it difficult to pay off external debts and leads to higher prices for imported goods.

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  • Moscow stock market has experienced the strongest fall in history. After the opening, it fell 30%, from 3,000 to 2,000 points, while the MSCI index of shares in Russian companies traded in London and New York dropped by 45%. Russia's largest lender Sberbank (SBER.MM), whose shares shed nearly 46% on the day Thursday, said it was ready for any eventuality and had worked out scenarios to ensure that its clients' funds, assets and interests were protected. Russia's largest second-largest creditor VTB (VTBR.MM) collapsed 42% a day after the UK announced imposing sanctions on the state-owned bank.
  • Russia's central bank bought millions of rubles to prevent the collapse of the Moscow Stock Exchange and prop up the currency after it fell to a historic low of 89.60 against the dollar. The Russian central bank is expected to further ease pressure on the ruble by raising its key interest rate, which it hopes will attract foreign investors looking for high returns. The bank is also expected to continue tightening monetary policy by raising interest rates to curb inflation, which is likely to worsen due to the ruble's fall.

So, how can the situation be recovered?

Russia’s crucial ace in a hole is its resources. European countries, for example, Germany, highly depend on Russia’s gas. As for oil, after Putin announced the invasion, the oil price rose approximately 730 points to $102.

The ruble was expected to be supported by the recovery in Russia and high prices for oil and gas, its main export commodity. Still, sanctions and risk aversion leave little room for recovery, which means lower living standards and higher inflation.

Therefore, the USD/RUB pair will continue to fluctuate, and most likely it will reach 100.00 in the near future, as well as the support can hold at 81.00.

 

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