A sensitive drop: the ruble is weakening against the yuan

On Wednesday, October 22, trading on the Moscow Stock Exchange opened with the strengthening of the Chinese yuan against the ruble. Some experts consider the situation paradoxical, as oil has gained more than $1 per barrel in price since yesterday. What exactly affected the weakening of the Russian currency relative to the Chinese one — read in the Izvestia article.

Strong rebound

Trading on the Moscow Stock Exchange opened with the strengthening of the Chinese yuan against the ruble. The growth relative to the close of yesterday's trading was +3.9 cents, and relative to yesterday's official exchange rate of the Central Bank — by 8.25 cents.

The decline is taking place against the background of a seemingly favorable factor in rising oil prices. On October 21, a barrel of Brent crude oil cost $61.3, and on the morning of the 22nd it already reached $62.5, followed by an adjustment to $62.3. The experts interviewed attributed the increase in quotations to rumors about an upcoming agreement between the United States and India, as a result of which New Delhi could significantly reduce purchases of Russian oil. The United States also announced plans to purchase an additional 1 million barrels of oil to replenish its strategic reserve. This means a significant increase in demand in the global black gold market.

Spartak Sobolev, head of Alfa-Forex's Investment Strategy Research department, interprets the weakening of the ruble within the autumn trade corridor of 78-85 rubles per dollar as a consequence of the renewed geopolitical uncertainty surrounding the negotiations between the presidents of the United States and Russia scheduled in Budapest. At the same time, the reason for the weakening of the ruble is partly due to changes in oil prices.

— The dynamics of oil prices affect the country's trade balance in the future and the revenue of energy companies from exports, which is later sold on the domestic foreign exchange market during tax periods. The current risks of reducing the foreign trade surplus are putting pressure on the ruble in the medium term," the analyst says.

For the budget, these risks are manifested in a reduction in income and a growing deficit, Sobolev stressed.

It's too early to judge

Vladimir Eremkin, a senior researcher at the IPEI Structural Research Laboratory of the Presidential Academy, described what is happening on the market as a correction.

— The weakening has replaced the strengthening. As a result, the ruble has adjusted to previous levels," he points out.

Among the reasons for the volatility, the expert identified an increase in demand for rubles from exporters who need to make payments in national currency — for debts, taxes and dividends.

— This initially led to the strengthening of the ruble. Now, this factor is probably fading into the background, and import demand is beginning to have a greater impact, as seasonal and New Year's Eve sales take place in November and December, and trade volumes are growing. As a result of the weakening of the influence of one factor and the strengthening of the other, there is a change in the trend in the exchange rate of the national currency," says the respondent of the publication.

Short—term movements of the exchange rate in one direction or another are a normal practice in the financial market. It is not necessary to look for the underlying reasons for today's dynamics, as analysts often use the same factors to explain the opposite changes in the exchange rate, says Grigory Zhirnov, an employee of the Laboratory of Macrostructural Modeling at the Faculty of Economics at the National Research University Higher School of Economics.

— It is much more important that the ruble remains 15-20% stronger than its long-term conditional "equilibrium" level, based on the dynamics of the real effective exchange rate. This means that in the medium and long term, it is logical to expect the beginning of a trend towards a weakening of the Russian currency, especially after the normalization of interest rates. But this process is likely to be gradual," he comments.

At the same time, the expert notes that under the budget rule, the impact of oil prices on the Russian currency is largely offset by sales and purchases of currency from the National Welfare Fund.

The "Chinese" factor

Among the reasons for the ruble's decline, a number of media outlets cite a surge in demand for foreign currency from importers.

At the same time, the drop will not be noticeable in the short term for one week, as the tax period starts in Russia, which is traditionally a factor supporting the Russian currency.

Yulia Makarenko, Deputy Director of the Banking Development Institute, strongly disagrees with the factor of interest in foreign currency.

"A significant decline is not observed evenly relative to all world currencies, which is usually accompanied by pressure factors, but only relative to the Chinese yuan. The reasons should be sought in the strengthening of the PRC currency, and not in the fall of the ruble," she believes.

According to the financier, there is every reason for the yuan to rise.

—The fourth Plenum of the CPC Central Committee of the twentieth convocation in China will be held from October 20 to 24,— Yulia Makarenko continues. — The approval of the 15th five-year plan is on the agenda. On the eve of the event, the authorities published macro statistics, according to which China, one of the few countries in the world, is currently managing to grow steadily. GDP growth of 5.2% was recorded at the end of the year instead of the planned 5%. Chinese statistics performed by the authorities and companies should be treated with a healthy degree of skepticism, but the fact is that the real estate crisis in 2025 has been overcome by increasing production and stimulating domestic consumption.

Thus, according to Yulia Makarenko, the yuan is growing against the background of market expectations regarding the further development of China.

The key rate factor

The Central Bank's rate decision on Friday is important for understanding the medium-term prospects of the market, but it will not have a significant impact on it at the moment, Spartak Sobolev believes. "The Bank of Russia has room to reduce the rate within 1%," the respondent told the publication.

Nevertheless, reports on the fate and possible details of the negotiations between the United States and Russia will determine the market mood for the next week.

But, according to Yulia Makarenko, there are so many opposing trends that any outcome of the meeting is likely.

"The reduction in the key rate is consistent with the general trend announced by the Bank of Russia to ease the monetary rate, and with the fact that the ruble is not weakening as actively as the authorities expected in order to generate more revenue from energy exports. At the same time, we can assume a pause — to manifest and assess the effect of the previous rate cut and combat rising seasonal inflation — ahead of the traditional acceleration at the end of the year," says the interlocutor of Izvestia.

According to her, there are prerequisites for a temporary tightening of monetary policy.

— In particular, to cool the lending market, which has noticeably revived after several declines in a row. In addition, a number of banks have increased deposit rates in recent days," the expert added.

Forecasts

Dmitry Kulikov, senior director of the ACRA group of sovereign and regional ratings, believes that expectations for exchange rate dynamics are currently influenced by the observed trend towards lower global commodity prices, as well as the expected decrease in ruble interest rates. These trends, acting together, are likely to be reflected in the weakening of the ruble. It is more than reasonable to expect a weakening of 5-10% by the end of the year, he states.

According to Vladimir Eremkin, the ruble is unlikely to weaken significantly by the end of the week. "The Central Bank's decision on the rate may provide some support if it remains at the current level. Since there is a low probability of further decline, the rejection of this can be viewed positively by the foreign exchange market," he concludes.

Yulia Makarenko predicts the establishment of currency corridors of 79-85 rubles per dollar, 92-98 rubles per euro and 11-12 per yuan. She attributes the wide variation to the overlap of geopolitical factors and the upcoming meeting of the Bank of Russia.

"And in the case of the yuan, a list of decisions is important that will determine the development of political and economic vectors in the future for 1-5 years," the financier summarizes.