The Russian rouble has weakened beyond the symbolic threshold of 100 to the dollar, driven by foreign currency outflows and a shrinking current account surplus. In response to the rouble’s last drop into triple digits in August, the Russian central bank raised interest rates by 350 basis points to 12% and discussed reintroducing controls. However, the currency recovered slightly in early trade on Tuesday, with analysts expecting it to make a short-lived move beyond 100 to the dollar in the absence of new support measures from the authorities. Brent crude oil, Russia’s main export, also dropped to its weakest level in almost a month.

President Vladimir Putin’s economic adviser criticized the central bank when the rouble fell to 101.75 per dollar in August, blaming its loose policy and indicating internal discord. The rouble’s turbulent course since Russia’s invasion of Ukraine in February 2022 has been influenced by Western sanctions, shifting trade flows, and changing export and import dynamics. As a result, Russia’s current account surplus has significantly decreased, shrinking by 86% year-on-year to $25.6 billion in January-August. Given these circumstances, analysts predict that the central bank may tighten monetary policy again at its next scheduled meeting on October 27.

While the rouble’s outlook may be slightly positively impacted by expensive oil and an increase in the key interest rate, the currency is expected to continue depreciating in the medium term due to the absence of new support measures. The weakening of the rouble beyond 100 to the dollar is not only a technical resistance but also a psychological barrier. This news comes as Brent crude oil, a significant factor for the Russian economy, falls to its weakest level in almost a month. The rouble’s depreciation is also attributed to the combination of falling exports due to Western sanctions and increasing imports. As a result, Russia’s current account surplus has seen a drastic reduction, creating challenges for the country’s currency.

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