The Russian ruble tumbled to a more than 15-month low past 93 against the dollar on Thursday before recovering some losses, pressured by strong demand for foreign currency and taking its losses since an armed mutiny in late June to around 9 per cent.
Capital controls have helped insulate the ruble against geopolitics during the more than 16 months since Russia invaded Ukraine, but mercenary leader Yevgeny Prigozhin’s aborted march towards Moscow on June 24 has reverberated through markets and raised questions about President Vladimir Putin’s grip on power.
By 1231 GMT, the ruble was 1.5 per cent weaker against the dollar at 92.38 after earlier diving to 93.85, its weakest since March 28, 2022.
It lost 1.5 per cent to trade at 100.51 versus the euro, earlier crossing the 102 threshold for the first time in more than 15 months, and shed 2.5 per cent against the Chinese yuan to 12.73.
“We have seen this several times before and there were bounces back,” Kremlin spokesman Dmitry Peskov told reporters on Thursday. “We know perfectly well that, as a rule, in such increases there is a significant proportion of speculative games, which cannot be excluded now.”
Russian authorities sought to project an aura of calm, but at the peak of Thursday’s losses, the ruble was down around 25 per cent year-to-date.
The ruble is being sacrificed to protect Russia’s budget, Eurasia-based consultancy Macro-Advisory said in a note, suggesting Moscow was now abandoning efforts to maintain a stable exchange rate with budget receipts well short of forecast.
“While it is still about stability, the notion of stability seems to be now centred around maintaining a fiscal balance and protecting the government’s FX reserves,” said Macro-Advisory.
Central Bank Governor Elvira Nabiullina said foreign trade dynamics were the most significant factor impacting the ruble, as export revenues drop and imports recover.
“Now the exchange rate’s dynamics carry pro-inflationary risks, we will take this into account on key rate decisions,” Nabiullina told a financial forum in St Petersburg.
Analysts polled by Reuters last week said they expected the Bank of Russia to raise interest rates from 7.5 per cent in July and again later in the year as the inflationary pressure intensifies. They see limited room for the ruble to strengthen in the coming 12 months.
The central bank’s explanations about the shrinking trade balance are “completely unconvincing,” said Dmitry Polevoy, head of investment at Locko-Invest.
“According to my estimates, this factor alone can explain levels of 80-85 (to the dollar),” Polevoy said. “All the rest are financial flows that are local in nature and hidden from prying eyes.”
Brent crude oil, a global benchmark for Russia’s main export, was down 0.6 per cent at $76.18 a barrel.
Russian stock indexes were mixed.
The dollar-denominated RTS index was down 0.5 per cent to 964.2 points. The rouble-based MOEX Russian index was 0.8 per cent higher at 2,828.1 points, earlier climbing to its highest point since the days before Russia invaded Ukraine on Feb. 24, 2022.