Russian ruble falls to 100 rubles per one US dollar

On Monday, August 14, the US dollar was traded above 100 and then above 101 rubles per one dollar. Such an increase in the rate of the US currency was registered for the first time since March 23, 2022. The European currency rose to 110.36 rubles per one euro.

In the evening, however, the dollar and the euro bounced back to 97.6 rubles and 106.6 rules respectively after the Central Bank announced an urgent meeting of the Board of Directors regarding the key interest rate. The ruble thus returned to it Friday (August 11) level. At the same time, the dollar and the euro are still more than two rubles more expensive than a week earlier.

Putin's aide Maxim Oreshkin told TASS that the weak position of the Russian currency makes it difficult to restructure the economy. Moscow is interested in normalising the exchange rate, and this is supposed to happen in the very near future, the official said.

"The current exchange rate has deviated significantly from fundamental levels, and it is expected to normalise in the near future. The weaker ruble complicates the restructuring of the economy and negatively affects real incomes of the population. The Russian economy is interesting in the strong ruble," Oreshkin said.

Reasons for the ruble to weaken

According to Oreshkin, the loose monetary policy is the key reason behind the weak Russian currency. Nevertheless, the Central Bank has all necessary resources to normalise the situation.

"The loose monetary policy is the main reason behind the declining ruble and accelerating inflation. The Central Bank has all the necessary tools to normalise the situation in the near future and ensure that lending rates are reduced to sustainable levels," he said.

Mikhail Zeltser, a stock market expert at BCS World of Investments, believes that the dollar would continue rising to 106 rubles per one dollar.

"The Russian currency has been declining due to the inertia of the previous days. Last week, the ruble had a chance to bounce back from the level of 97 rubles per dollar, but the decision of the Central Bank to cancel foreign currency purchase under the budget rule in a situation of declining exports and growing imports was clearly not enough. The trend resistance has been disrupted and the next stop is technically near the level of 106 rubles per dollar. Judging by the experience of 2022, the regulator has tools to stop panic:

• export earnings return standards;
• obstacles to capital outflow;
• key rate.

"We are waiting for the authorities to react," the analyst told banki.ru publication.

Forecasts for the ruble rate have not changed considerably for 2023, the analyst added.

"The volatility of the exchange rate comes as the aftermath of the critical shortage of currency supplies in the market,” Zeltser added.