Ruble Falls Below 100 per Dollar as Economic Pressures Intensify in Russia

Russia‘s economic landscape faced a significant marker this week, as the country’s Central Bank set the ruble’s official rate at over 100 to the dollar for the first time in over a year. The development has underscored growing financial strains within the nation amid ongoing geopolitical tensions.

The exchange rate, pegged at 100.03 rubles per dollar, marks a nearly 19% depreciation since a notable event in August, when Ukraine launched a surprise incursion into Russia’s Kursk region. This depreciation arrives in the wake of President Vladimir Putin‘s recent strategic decisions, including lowering Moscow‘s nuclear strike threshold following the United States’ authorization for Kyiv to use long-range missiles against targets within Russia.

October 2023 was the last instance when the ruble crossed this significant mark, largely driven by concerns over Russia’s economic growth and rising inflation. Although President Putin implemented measures to stabilize the currency at that time, a recent report by Bloomberg indicates a shift in the government’s perspective. Authorities in Moscow appear less perturbed by the ruble’s reduced value now, as they gear up for substantial hikes in military spending.

The Russian Central Bank has maintained its practice of setting official exchange rates subsequent to the Moscow Exchange’s suspension of dollar and euro trading due to U.S. sanctions. Current rates are derived from over-the-counter transactions among major exporters and commercial banks.

A weakening ruble poses a risk to the purchasing power of Russian citizens, potentially escalating the cost of imported goods. This new valuation of the ruble witnesses parallels with historic lows, such as the 150 per dollar rate observed following Russia’s invasion of Ukraine in early 2022, a period which saw temporary recovery through strict capital controls imposed by the Central Bank.