To spite everyone: why the ruble continues to strengthen

In mid-October, the Russian currency broke the psychological mark of 80 rubles per US dollar and continued to strengthen. Currently, the exchange rate fluctuates around 78 rubles per US dollar. Many are predicting further changes in connection with the decision of the Bank of Russia next Friday. What will determine the ruble exchange rate in the coming weeks — read in the Izvestia article.

A time of paradoxes

There are currently powerful factors at work in Russia that should weaken the ruble, the experts surveyed agree. Nevertheless, so far it has not been possible to knock the ruble off its strengthening course.

Yulia Makarenko, Deputy Director of the Banking Development Institute, highlighted the increased sale of gold and foreign currency by the Ministry of Finance as factors for strengthening the ruble in the fall.

— The effect of the key rate cut in September also continues to work. This measure traditionally has a cumulative rather than instant effect," she says.

In addition to regulatory factors, there are purely economic ones.

— In particular, the decrease in the foreign trade balance in September compared to August from $ 13.7 billion to $13.17 against the background of low oil prices (Urals yields $ 56.50 per barrel — additional discounts for Asian partners can be guessed, — she continues.

The financier noted that the manufacturing business activity index (PMI) fell to 48.2 in September (recall that the indicator below 50 is a sign of recession). "Thus, the reasons for the strengthening of the ruble should not be sought in the Russian economy," she summarizes.

Among the factors that led to the strengthening of the ruble, contrary to forecasts, Nikolai Dudchenko, an analyst at Finam Financial Group, highlights among the strengthening factors, first of all, a decrease in interest in foreign currency.

— Firstly, the reduction in imports, which logically reduced the demand for foreign currency. Secondly, foreign financial companies, NWFCS and NPOs also sell foreign currency. And thirdly, there is a lack of interest in buying foreign currency from individuals. Thus, according to the Central Bank, the accumulated volume of purchases from the beginning of the year to September amounted to 762 billion rubles, which is 1.4 times less than YoY," Dudchenko said.

The second side

There is always a mutual influence of factors in currency pairs, says Yulia Makarenko.

— In this case, the fall of the ruble restrains the weakening of the second participant of the currency pair, the US dollar. The ongoing shutdown is hitting both the economy (downtime costs at least $400 million) and public sentiment and investor sentiment. Civil servants do not receive salaries, and the implementation of projects with state participation has been suspended. And all this against the backdrop of a snowball-sized government debt. And the Federal Reserve, if nothing changes, will be forced to make a decision on the discount rate blindly, without focusing on the most important data that has not been published (we are talking about employment in the non-agricultural sector and inflation). Hence the surge in interest in gold, silver, and cryptocurrency," she says.

Moreover, this mutual influence is universal.

— So, all the factors have developed for the weakening of the single European currency. In particular, the dissolution of governments and the decline in economic activity: the pace of industrial production in the EU fell to 1.1%. The euro and the dollar weakened almost simultaneously. Nevertheless, the parity along the trade corridor remains, with a tendency to decrease to 1,1400," she concludes.

An important decision

The experts interviewed agree that the rate of weakening of the ruble will largely depend on the decision of the Bank of Russia on the key interest rate.

According to Anna Fedyunina, associate professor at the HSE Faculty of Economics, the chance of maintaining the key rate at 17% at the October 24 meeting is very high.

— Such a decision would be logical in the light of the ongoing pro-inflationary pressures. In October, according to monitoring data from the Central Bank, business price expectations rose sharply for the first time since January 2025. This is an alarming signal: if companies start to plan for higher rates of price growth, this can trigger a self—sustaining inflationary cycle," she argues.

According to the expert, after a short-term August decline in prices in September, inflation began to rise again, which confirms the stability of inflation risks. She also recalled the upcoming increase in VAT by 2 percentage points from the beginning of 2026.

— Even now, a few months before its entry into force, there is an effect of "anticipation" — businesses are actively accumulating stocks, and consumers can accelerate purchases to avoid future price increases. This creates additional short—term pressure on prices," concludes Fedyunina.

Olga Belenkaya, Head of the Macroeconomic Analysis Department at Finam, sees two main scenarios for the development of events at the next meeting. This is a pause in the course of monetary policy easing or a 0.5 percentage point reduction in the key rate.

— The strengthening of pro—inflationary risks speaks in favor of the first decision - in October, inflation accelerated against the background of a new historical low in unemployment, accelerated wage growth and, at the same time, gasoline prices. There are no signals of easing tensions in the labor market, but the speed of lending and domestic demand are growing, pro-inflationary risks are intensifying in the short term, and geopolitical risks are becoming more numerous. The pause at the October meeting may provide the regulator with an opportunity to assess the impact of the key rate cut and new temporary pressures on inflation, inflation expectations, savings and consumer activity, and lending. If the pressure from pro—inflationary factors weakens, the Central Bank may lower its key rate again at the December meeting," she says.

At the same time, the expert says, the prerequisites for another rate cut remain.

— The slowdown in economic activity in the third quarter continues in the context of the still very high real key interest rate. In addition, there is a relatively stable dynamics of the stable components of inflation in September, with its significant slowdown since the beginning of the year, and the risks to inflation from fiscal policy in 2026 are decreasing. And, of course, the strengthened ruble, which is extremely unprofitable for replenishing the treasury," says Belenkaya.

In the second scenario, the decrease, if any, will be insignificant, by no more than 0.5 percentage points, she believes.

Dmitry Kulikov, Senior Director of the ACRA Group of Sovereign and Regional Ratings, sees a rate cut of 1 percentage point as the most likely outcome of the October 24 meeting of the Bank of Russia.

— Currently, relatively weak growth in business activity and weak lending in certain segments are on one side of the scale, while the inflation trajectory, the risk of a weakening ruble and inflationary expectations, which are currently supported, for example, by the decision to increase the VAT rate, are on the other. The first group of factors is working towards a more rapid easing of monetary policy, while the second group is working towards more conservative approaches to rate management. Compared to the previous meeting, one of the important factors contributing to significant uncertainty is budget plans. The cumulative impact of fiscal policy in the short term is pro-inflationary, but on a horizon comparable to the lags of the PREP, it should be considered rather neutral or, in some conditions, even disinflationary (provided that the plans are implemented). I think this is a significant consideration that will allow the Bank of Russia to continue easing policy at the end of 2025, despite the short—term effects of tax decisions," the expert comments.

According to the analyst, by the end of 2025, the inflation range from the medium—term forecast of the Bank of Russia will approach the July figures of about 6.5% yoy, and economic growth for the full year will be about 1%.

Alexander Abramov, head of the Laboratory for Analysis of Institutions and Financial markets at the Presidential Academy, agrees with the assessment of reducing the key rate to 16%.

— Despite the continuing pro—inflationary risks, such as rising fuel prices, a significant budget deficit financed by government securities, and an active increase in lending, the overall dynamics of inflation is showing a slowdown. This is evidenced by a decrease in inflation in annual terms, a cooling of the labor market and a slowdown in price growth in many sectors of the economy," he commented.

Currency forecasts

According to Finam analyst Nikolay Dudchenko, the dollar/ruble exchange rate is expected to be in the range of 78.5-81.6 by the end of this week and early next week.

According to Yulia Makarenko's forecast, further developments depend on how quickly the American authorities come to an agreement and the shutdown stops.

— After that, we should expect a strengthening of the dollar's position and, as a result, a sharp jump in the Russian currency. In the absence of news, the currency corridor will remain at around 77-80 rubles per dollar," she explains.

The exchange rate probably won't change significantly, as the market will be waiting for the outcome of the Central Bank meeting, Anna Fedyunina believes.

— If the Central Bank's rhetoric contains signals about maintaining the rate without hints of an early easing, the ruble may strengthen a little more. At the same time, any hints of warming up inflation or slowing investments may put pressure on the currency, the expert believes.