Rise of the Ruble: Is it Permanent or a Temporary Trend?

Decrease of the Ruble and Recent Increase

In the Russian financial markets, the dollar/ruble exchange rate fell to its lowest levels in the last 2.5 years in the first days of December, dropping below 76 rubles. In the Forex market, it momentarily fell below the 75 level, indicating a remarkable fluctuation. During the same period, a similar decrease was observed against the Chinese yuan, which declined to its lowest level in approximately three years.

Expert Opinions and Economic Risks

According to experts, this rapid appreciation of the ruble presents a strong outlook in the short term, but carries significant economic risks in the medium term. The Central Bank of Russia recorded the lowest official dollar exchange rate of the last 2.5 years at 76.97, announced on December 5.

Economic Fundamentals and Temporary Factors

Economists speaking to RBC express that this sharp decline stems from temporary and structural factors rather than economic fundamentals. The increased policy interest rate has raised the cost of ruble-denominated loans, reducing demand for foreign currency. Additionally, the intense currency sales by exporting firms and measures restricting capital movements have contributed to the ruble's appreciation.

Importance for Investors

It should also be noted that large currency sales taking place in a market with low trading volume have driven the exchange rate down faster than normal. According to expert assessments, the current ruble level is inconsistent with economic balances; the realistic equilibrium exchange rate should be in the 90–100 ruble range.

Decrease in Competitiveness

It is pointed out that the prolonged maintenance of the ruble above its necessary value may lead to a decline in budget revenues, weakened competitiveness in exporting sectors, and suppressed domestic demand. Particularly in the coal and metallurgy sectors, reduced profitability is reported due to the strong ruble.

Future Predictions

Experts note that the current economic situation arises from a combination of trade balance, high interest rates, and restrictions on capital movements, predicting that this will not be permanent. In December, the Ministry of Finance's daily currency sales increased to 5.6 billion rubles to finance the budget deficit, and the central bank's increased yuan sales have created another pressure factor on the exchange rate.

Finally, it is also stated that increasing expectations of peace in the geopolitical realm have weakened foreign currency demand and made markets more sensitive to positive developments. According to the common view of analysts, the ruble is expected to enter a gradual weakening trend by 2026.