Russian Ruble Hits Record Low In Nine YYears

It has secured itself a place among the top 3 weakest currencies in the world.

At the end of 2023, the Russian ruble showed its strongest decline since 2015 and entered the top 3 ratings of the weakest currencies of developing countries tracked by Bloomberg.

The dollar exchange rate from 71.8 rubles at the beginning of the year rose by 26%, to 90.36 rubles at the close of the last trading on December 29. The euro rose in price by 28%, from 76.2 to 97.7 rubles, and the Chinese yuan by 24%, from 10.14 to 12.61 rubles. Only two currencies in the world showed a stronger fall against the dollar: the Turkish lira (by 36.6%) and the Argentine peso (by 78%).

The devaluation of the ruble could have been stronger: in August, the growth of exchange rates reached 30-40%, the dollar was worth more than 100 rubles, and the euro broke through the 110 mark. In response, the Central Bank of the Russian Federation sharply increased the key rate — from 7.5% to 16% per annum, and the authorities, first non-publicly and then by presidential decree, demanded that exporters sell more currency on the exchange in order to support the foreign exchange market.

Since October, four dozen largest companies have been required to deposit 80% of foreign currency earnings in Russian banks and sell 90% of this volume on the stock exchange. The Central Bank will be able to exclude those who create threats to the ruble from trading — the State Duma gave it the corresponding powers at the end of December.

In the Kremlin, the dollar at 100 was considered a threat to the regime — that is why the Central Bank was instructed to urgently intervene in the situation in order to stabilize exchange rates and inflation on the eve of the elections scheduled for March 2024, sources told Bloomberg.

The presidential administration expects that the dollar exchange rate will drop to 75-80 rubles before the elections, sources close to the Presidential Administration and the government told Meduza. According to one of them, Putin “doesn’t like” the exchange rate of 90–100 rubles, although it helps fill the budget, and the strengthening of the ruble should show that the “situation” in the country is “getting better.”

The authorities will be able to hold the ruble at least until spring, while the presidential decree on the mandatory sale of currency is in effect, after which rates will creep up again, and by winter 2024 the dollar will cost 103 rubles, according to economists surveyed by Reuters. In the budget for 2024, the government included the dollar at 90.1 rubles, with a subsequent gradual weakening to 91.1 rubles in 2025 and 92.3 in 2026.

The problem for the ruble was the sharp reduction in the inflow of foreign currency: according to the Gaidar Institute, in 2023 the Russian economy will receive $420 billion in export earnings — the minimum amount since the 2020 pandemic, which is 29% lower than a year earlier, and 15% less than pre-war levels. The economy will receive even less real currency: 40% of export transactions, according to the Central Bank, are paid in rubles. This leaves about $250 billion in foreign exchange inflows, of which nearly half comes from the yuan. By the end of 2023, only about $110-120 billion may arrive in Russia in dollars and euros, which corresponds to the level of the early 2000s.