On November 27, panic selling occurred in the Russian ruble. The ruble's exchange rate against the US dollar once fell by more than 8.5% to 114.75 rubles per US dollar, a new low in a year. The Russian ruble's exchange rate against the euro has also fallen below 120 rubles per euro, with an intraday drop of more than 9%. Since last Thursday, the ruble has fallen by more than 12% against the US dollar, and by more than 13% against the euro.


According to the Financial Associated Press, many analysts believe that there is no other reason for the ruble's fall except that Russia's military operations in Ukraine triggered a new round of tensions with the West and new financial sanctions.

According to CCTV News, on November 21, local time, the United StatesMinistry of FinanceThe Office of Foreign Assets Control (OFAC) issued a statement announcing the imposition of sanctions on Gazprombank, more than 50 Russian small and medium-sized banks, more than 40 Russian securities institutions and 15 Russian financial officials.

Sanctions on Russia's financial sector exacerbated the ruble's slide. Sanctions disrupt foreign trade payments,Payments for oil and gas, in particular, have led to foreign currency shortages in the Russian market. Currently, many analysts predict that the U.S. dollar-ruble exchange rate may hit a level of 115 to 120 rubles per U.S. dollar before the end of the year.

A few days ago, Commerzbank foreign exchange analyst Tatha Ghose said in a report that the ruble has depreciated sharply in the past week as geopolitical conflicts and sanctions have affected Russia's energy and commodity trade, resulting in weak fundamentals. He said this was less evident if one looked only at the dollar against the ruble, as the greenback had risen strongly against emerging market currencies. "But it's clear when looking at the euro-ruble exchange rate, which has also been rising since mid-November."

Russia's economy has been hit by Western sanctions since the conflict between Russia and Ukraine. Russia's energy revenues fell by nearly a quarter last year, partly due to Western trade restrictions, including a $60-a-barrel price cap on Russian oil.

According to CCTV News,On November 27, local time, the Central Bank of Russia issued a statement stating that the Russian Central Bank will suspend the purchase of foreign currencies in the Russian domestic market from November 28, local time, to the end of 2024.

The Central Bank of Russia stated that this decision will help reduce volatility in the financial market, and that the Central Bank of Russia will decide whether to resume foreign currency purchases in early 2025 based on the country's actual economic situation.

The Russian Minister of Economy stated,The current depreciation of the ruble has nothing to do with fundamental factors. According to preliminary data from the Russian State Statistics Service, Russia's agricultural production fell by 3.8% year-on-year from January to October 2024, to 7.76 trillion rubles (approximately US$68.58 billion).


Picture source: Photo by Wang Jiaqi, a reporter from Every Journal

Russian Finance Minister Siluanov pointed out that the weak ruble is beneficial to export companies. However, the depreciation of the ruble will also increase the cost of imported goods and push up Russia's domestic inflation rate.

Starting from the end of 2023, the Russian Central Bank will maintain the key interest rate at 16%. However, against the backdrop of accelerating inflation, the bank raised it to 18% in July this year and to 19% in September.

All experts previously interviewed by RIA Novosti predicted that the key interest rate would rise. They just disagreed on whether it would reach 20% or 21%. Most analysts believe the rate-cutting cycle could begin next summer.According to an Agence France-Presse report on October 25, as inflation soared, the Central Bank of RussiaSignificant increaseinterest rate to 21%, raising the loan cost to more than 20%highest level in years.

After the hike, the country's interest rates exceeded the emergency rates introduced shortly after February 2022 and reached their highest level since 2003.

Russia's central bank directly blamed the inflation on the government's huge spending and said it may raise interest rates again if price increases do not slow down.In its announcement announcing the rate hike, the bank said:“Additional fiscal spending and the associated widening of the federal budget deficit in 2024 will have a pro-inflationary effect."

The conflict between Russia and Ukraine has led to a significant increase in Russian government spending, labor shortages in all areas of the economy, and soaring inflation. This yearIn September, Russian prices rose by 8.6%, more than twice the official inflation target (4.0%).