Will the Russian ruble recover soon?

Russia's central bank saves the ruble

Moscow - The ruble has had difficult months. Since the beginning of the summer, the Russian national currency has only known one direction: down. While one euro cost around 80 rubles at the beginning of July, the Russians had to put down more than 92 rubles at the end of September. A loss of 15 percent. In September alone, the ruble lost around six percent.

A whole bouquet of crises is to blame for this: The corona crisis has worsened again massively in Russia. There are now around 9,000 new infections per day, which means that Moscow's mayor Sergej Sobyanin felt compelled to arrange the home office for companies based in the capital.

Oil price shock

After a brief recovery phase in the summer, economic expectations are again clouded, especially since Russia has to reckon with external oil price shocks again.

Two political crises occurred in August: First, after extremely controversial elections in Belarus, Alexander Lukashenko declared himself the winner and was only supported by Moscow; on the other hand, the oppositionist Alexei Navalny was poisoned shortly afterwards in Russia. The affairs have further strained the already strained relationship between East and West. The fear of new sanctions against Russia is great.

As if that weren't enough, Armenia and Azerbaijan have now opened a third front for Russia in the Nagorno-Karabakh conflict, which could potentially bring the country into a conflict of interest with Turkey.

Knight in shining armor

The Russian central bank has now come to the aid of the ruble, for whose course these developments are poison, with its kind of atropine syringe. The state financial market regulator wants to support its own national currency with currency sales. Sales began on Thursday and are expected to continue through the end of the year. According to estimates by the central bank, the equivalent of two billion euros will be needed to support the course.

The central bank is now throwing around another 30 million euros in foreign currency onto the market every day. This is in addition to the approximately 25 million euros that the institute sells daily according to a directive of the Ministry of Finance to secure the budget. The money comes from the sale of Sberbank, whose shares the central bank ceded to the government in February.

In addition, the government has also instructed the state-owned companies to sell their surplus foreign exchange from export transactions. If the measures are not enough, market observers assume that the central bank will go to the currency and gold reserves.

First recovery

The actions of the central bank have already started to take effect. The ruble rate has recovered. For Friday, the central bank set the official exchange rate for the euro at 90.72 rubles; this means that the euro is almost two rubles cheaper than the day before. The dollar costs 77.28, which is 1.50 rubles less than before.

However, it remains to be seen whether the support measures are sustainable. There is also a lot of uncertainty in the market. If sanctions against Russia are decided, the pressure on the ruble will increase again. (André Ballin, October 2nd, 2020)