The official US dollar rate set by the Central Bank of the Russian Federation since March 12 has been lowered to 77.96 rubles.
On March 9, 2020, “Black Monday” took place on the financial and oil markets. May futures for North Sea Brent crude oil collapsed on the night of March 9 immediately by 31% - from Friday $ 45 to $ 31. This sharp drop occurred due to the fact that the OPEC + alliance countries were unable to agree on March 6 on further reducing oil production, nor on extending the transaction for a longer period. In addition, Saudi Arabia announced its intention to increase production and lower oil prices.
Thus, an international panic unleashed on the currency market - the Russian national currency rate fell to 86 rubles per euro and to 75 per the US dollar during that day.
For many years, the Russian authorities have been saying that the ruble is less dependent on oil prices. But as recent events have shown, this is not true. After the OPEC + March 6 transaction was disrupted and the coronavirus has been declared a pandemic, oil began to rapidly fall in price: the price of a barrel of Brent oil on March 16 fell below the psychologically important mark of $ 30, although at the beginning of the month its price was around $ 50.
Another reason for the weak dynamics of the ruble against the dollar are the actions of foreign investors. Last year, the ruble was a popular currency among non-resident investors who bought Russian currency for investment. Now those who entered ruble-denominated assets are getting out of them very fast.
According to Bank of America, from March 9 to 13, foreign investors took a record $ 2.2 billion from the debt market of developing countries, phenomenon that last happened in 2016. Out of the shares of emerging markets, almost half of the outflow was from Russia - $ 0.5 billion.
What will next happen to the ruble?
According to Bloomberg, in the event of a collapse of the US market and a decrease in the S&P 500 index by 32%, as happened during the previous financial crisis, the ruble will react to this decline worse than the currencies of other developing economies and will fall by 29.5%. According to the agency’s analysts, the Russian currency will suffer big losses, as oil prices will drop due to the recession in the global economy.
The weakening of the ruble is a temporary phenomenon, according to some russian economic experts. In their opinion, once the panic settles and investors return to their assets, they will resume carry-out operations, and then the ruble will begin to grow again.
However, when would exactly the panic settle is a big question. Some say the fact that Russia joined the fight against the virus and its consequences later than the authorities of other countries can lead to the ruble being at the level of 80 rubles per dollar for a much longer time than expected.
We hope this article helped you learn more about the Russian ruble and it’s actual situation!
As always, remember to stay at home and take care!
