Turning to a new course: what will happen to the ruble by the end of the year
The ruble's exchange rate against major currencies has been at its highest levels since 2022 in recent months. The growth that has emerged since the beginning of the year, unexpected by many market participants, was followed by a slight decline against both the dollar and the yuan in the past quarter. Nevertheless, the ruble remained very expensive. The situation is likely to change this quarter, although much will depend on the policy of the Bank of Russia. Details can be found in the Izvestia article.
At the beginning of July, the dollar was at one of the lowest positions in recent years — about 78 rubles. Such quotes were associated with the general low demand for the US currency, coupled with the high rate of the Central Bank, which made it extremely unprofitable to invest in the currency. Even the lifting of restrictions on the sale of foreign exchange earnings has not fundamentally changed anything. In general, the dollar gained about four rubles, or 5%, in the third quarter. The yuan, in turn, has risen by 60 cents in three months, or just over five percent.
The ruble lost some ground, but it still remained relatively strong. Although analysts tried to calculate a "fair" ruble exchange rate (based on the difference between inflation in the issuing economies), it was obvious that all this could only work in the long term. In theory, the ruble should have been cheaper, but the real demand for the currency now does not allow it to weaken to "fair" indicators.
A strong ruble has a positive effect on curbing inflation in Russia, especially coupled with noticeable deflation in the country's largest trading partner, China. At the same time, the high exchange rate of the national currency affects both the profits of Russian exporters and the budget, which this year is likely to be in deep deficit (in the region of 5.5–6 trillion rubles). The Central Bank, in turn, fundamentally refuses to participate in exchange rate targeting, focusing on controlling inflation..
What will happen next? The future is extremely uncertain, as there are too many unpredictable factors affecting the ruble at the same time. Russian analysts helped Izvestia to understand these trends.
"A rapid rate cut weakens the ruble"
Alexander Potavin, Analyst at FG Finam
One of the most significant factors for the ruble exchange rate in September was the reduction of the Central Bank's key rate by 100 bps, to 17%. The logic works here: the higher the key rate, the fewer reasons to expect rubles to flow into foreign currency from businesses and the public, the longer credit conditions will remain tight, which will restrain the growth of demand for foreign currency from importers. And vice versa: a rapid rate cut weakens the ruble exchange rate.
The mood in the foreign exchange market continues to be influenced by geopolitical events in the autumn. The prospects for peace talks between Russia and Ukraine are still unclear, which means that the EU and the United States may maintain a tough attitude towards the Kremlin, which is fraught with new economic sanctions that reduce Russia's export potential.
However, despite all these negative aspects, the ruble also has strong fundamental support factors. These include: strict currency controls introduced after the outbreak of military events in Ukraine to prevent capital outflow from the country; high volumes of sales of foreign exchange earnings from Russian exporters, which so far closes domestic demand for foreign currency; growing volumes of transactions in rubles for exports and imports, which reduces the need for hard currency (in particular in June, the share of ruble payments in exports exceeded 55%); relatively stable sales of Russian oil on international markets.
In a situation of high ruble rates, in order to pay taxes, taking into account the time lag and the strengthening of the ruble, exporters need to sell more currency. This, in turn, further strengthened the exchange rate, which forced them to sell even more currency. When ruble rates decrease and exchange rates rise against the ruble, this scheme begins to unwind in the opposite direction.
Thus, in the third quarter, we saw a balance of supply and demand in the foreign exchange market, which is why the ruble exchange rate was quite stable. However, in August and September, the dynamics of the ruble exchange rate began to be significantly affected not only by the volume of currency sales by exporters, but also by the volume of its purchases. By zeroing out the standard for the mandatory sale of foreign exchange earnings, the government sent a clear signal to businesses about the undesirability of a strong exchange rate, which means that the medium-term balance in the foreign exchange market began to change in favor of a lower ruble. The dynamics of the ruble exchange rate is also slightly affected by operations on the foreign exchange market by the Ministry of Finance and the Central Bank: a decrease in foreign exchange sales (to compensate for the loss of oil and gas revenues) moderately weakens the Russian currency.
In the future of the fourth quarter, we expect that the dollar/ruble pair will gradually lose ground, first reaching the 86.5 ruble milestone, and after that, the dollar is likely to rise to the 90 steering wheel area. If the volume of currency sales from the NWF gradually decreases, and the demand for foreign currency in the domestic market increases, then closer to the end of the year, the dollar exchange rate may rise to 93 rubles.
We believe that the process of weakening the ruble against the yuan will be shifted towards the end of 2025. We expect that the trading range for the yuan/ruble pair in the fourth quarter will be 11.5–12.5 rubles.
"The connection with barrel rubles is lost"
Yulia Khandoshko, CEO of the European broker Mind Money
The government's economic unit and the Bank of Russia have one common indicator that they focus on — the inflation rate and inflation expectations.
The ruble exchange rate, in turn, is a fairly manageable instrument due to the obligation to sell export earnings. That is, by setting the required level of currency exchange for rubles, the government can move the exchange rate within the required framework. Given these two factors, in my opinion, the economic bloc has no reason to let the course float until the New Year. Moreover, we are already seeing a strengthening of the ruble after a slight drop in September.
Obviously, the impact of the exchange rate on inflation is quite significant: according to estimates voiced by Deputy Chairman of the Central Bank Zabotkin, the ratio is approximately 4:1 or 5:1, that is, a weakening of the ruble by 5% can lead to up to 1% inflation. Therefore, I do not expect significant fluctuations in the exchange rate before the end of the year, otherwise it will greatly affect inflation, which is the main goal of both the government and the Central Bank.
In addition, before the pandemic, there was a simple logic: the ruble could be conditionally linked to oil. For each barrel, Russia received a certain amount of dollars (an average of 200-400 rubles), and on this basis, it was possible to approximately predict the ruble exchange rate.
However, even then there were arguments about the need to reduce dependence on the oil needle. If you look at the budget for the coming years, the oil and gas sector, of course, remains important, but taxes, that is, the people themselves, are no longer the key source of revenue. In this sense, we can say that people are the new oil.
That is why, I repeat, it is logical to expect that the exchange rate will not fall sharply, since the connection with barrel rubles has actually been lost, and new mechanisms have come to replace it.
"Recycling and new taxes will raise the ruble"
Pavel Biryukov, Chief Economist at Gazprombank
The weakening trend of the ruble may continue, as we expect an increase in fundamental pressures on its exchange rate in the last quarter of the year. First of all, this is the expected reduction in the current account surplus from $63.9 billion in 2024 to $33-38 billion by the end of this year. This will be due to the effect of subdued oil prices and high imports. The latter accelerated in the summer under the pressure of a strong ruble (+4% yoy on average for June-July), and in the autumn it can be expected to grow on the eve of increased recycling (from November) and indirect taxes (from January).
The ruble may also have an additional impact in the fourth quarter of 2025 on the recovery in demand for the currency as a result of the softening of the PREP: the average key rate for the last quarter of the year may be about 16.6% against 20.9% in the first half of the year. Under these conditions, we expect that by the end of the year, the ruble may approach long-term fair levels (90-95 per dollar) and continue to weaken smoothly in 2026.
"The trade balance will continue to shrink"
Dmitry Rozhkov, Director of Treasury, Digital Bank
At the moment, high interest rates justify a strong ruble, which remains stable, including against the background of carry trades (transactions aimed at generating income from the difference in interest rates on different currencies). The rhetoric of the regulator at this stage does not allow us to conclude that the cycle of tight monetary policy is rapidly winding down. Depending on incoming macroeconomic data (primarily on inflation) The Bank of Russia may lower its key rate to 16% by the end of the year or even keep it at the same level. In the latter scenario, the ruble will continue to receive support from capital flows, in which case exchange rates may stabilize around current levels or slightly lower (about 81 rubles per US dollar, for example).
On the other hand, the ruble weakened slightly in September amid expectations of an easing of the monetary policy of the Bank of Russia and on the eve of the regulator's meeting. A reduction in the key rate potentially leads to a decrease in the profitability of ruble assets and, as a result, a reduction in foreign exchange sales by exporters (who sold $6.2 billion worth of foreign currency in August after $9 billion in July). In addition, the reduction in the supply of currency from exporters is explained by the compression of export earnings against the background of unfavorable conditions in the oil market. Thus, the supply of foreign currency in the domestic market continued to decrease.
At the same time, demand for foreign currency is recovering, including due to seasonal factors, as importers replenish stocks ahead of the New Year holidays. In the first half of 2025, the trade balance decreased by 19.2% compared to 2024, amid a 6% decline in exports and a moderate 1% increase in imports. In principle, the trade surplus will continue to shrink, which will put pressure on the ruble. In this case, the ruble may weaken towards 90-95 rubles per US dollar before the end of the year.
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