Russian Ruble Hits 20-Month Low, Central Bank Halts Foreign Currency Purchases
Date
11/28/2024 5:00:26 AM
(MENAFN- The Rio Times) The Russian ruble has plummeted to its lowest value since March 2022, forcing the Central bank of Russia (CBR) to take drastic measures.
On November 27, 2024, the CBR announced it would suspend foreign currency purchases in the domestic market until the end of the year. This decision comes as the ruble traded at 108.01 against the US dollar, marking a significant decline.
The currency's weakness was even more pronounced on the Forex market, briefly surpassing 114 rubles per dollar. These figures represent a nearly 10% loss in value since early November.
Several factors have contributed to the ruble's decline. Ongoing geopolitical tensions, particularly the conflict in Ukraine, continue to impact Russia 's economy.
Recent US sanctions targeting Gazprombank and over 50 Russian banks have exacerbated the situation. Additionally, declining oil prices have reduced Russia's foreign currency inflows from exports.
The CBR's move aims to stabilize the currency and reduce financial market volatility. While halting foreign currency purchases, the bank will continue selling foreign currency to replenish the National Wealth Fund.
Daily sales of 8.4 billion rubles will persist as previously announced. This isn't the first time the CBR has taken such action. A similar decision was made in August 2023 when the ruble faced pressure.
Russia's Economic Crossroads
The central bank's intervention seeks to support the ruble, which has lost over 24% of its value since early August 2024. Despite the currency's weakness, Russian Finance Minister Anton Siluanov described the current exchange rate as "very favorable" for exporters.
This perspective suggests that a weaker ruble could benefit certain sectors of the Russian economy. However, the ruble's depreciation poses challenges for the broader economy.
It may lead to increased inflation and reduced purchasing power for imported goods. The situation highlights the delicate balance between supporting exports and maintaining economic stability.
Looking ahead, the CBR plans to resume foreign currency purchases in 2025. The bank will base this decision on the evolving situation in financial markets.
Analysts predict the ruble could weaken further to 115-120 per dollar by the end of 2024. As Russia navigates these economic challenges, the global community watches closely.
The ruble's performance serves as a barometer for the country's economic health amidst ongoing geopolitical tensions. The coming months will reveal the effectiveness of the CBR's intervention in stabilizing the Russian currency.
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