The weakening of the Russian currency is being attributed to changes in the trade balance and strong demand for foreign currency
© Getty Images / Andrey Rudakov/Bloomberg
The Russian ruble weakened past the symbolic threshold of 100 to the US dollar on Tuesday, as foreign currency outflows and a changing trade balance continue to weigh on the currency. The last time the ruble was trading at 100 to the greenback was August 14.
The Russian currency recovered slightly through the morning to trade just above 99 to the dollar. It also made a slight gain against the euro, after dropping to a low of 104.6.
The ruble’s weakness has been attributed to soaring demand for and insufficient supply of foreign currency in the country (including demand from importers), as well as changes in the country’s trade balance.
“At the moment, the end of the tax period, speculative issues, as well as a decrease in the liquidity of the already ‘thin market’ due to the holidays in China from October 2 to 6 are additionally playing against the national currency,” investment strategist at BKS Mir Investment Aleksandr Bakhtin told Prime News.
Bakhtin projected that the ruble could stabilize to 95-96 against the dollar within a month, and by the end of autumn, strengthen to 90. He also said that the effect of the recent key rate hikes by the Russian central bank could also gain momentum in the near future.
READ MORE: Russian central bank announces major interest rate hike
On August 15, the regulator increased the key interest rate from 8.5% to 12%, following a percentage point hike in the previous month. Prior to that, the rate had remained unchanged for several consecutive meetings since last October.
The regulator has stated that the ruble’s depreciation poses no risk to Russia’s financial stability. President Vladimir Putin’s economic adviser, Maksim Oreshkin, also said he expects the Russian currency to stabilize, and that the central bank has all the tools necessary to deal with the issue.
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