Ruble Continues to Weaken, Negative Scenarios Loom

In recent months, the Russian ruble was under pressure due to several factors including the conflict in Ukraine, Western Sanctions, and the falling oil price. The ruble’s value has fallen by more than half against the US Dollar since the beginning of the year.

There are several reasons to think that the ruble will continue to weaken. The war in Ukraine has not ended and it does not appear that it will. Western sanctions, which continue to burden the Russian economy, will therefore remain in place.

Second, the falling oil price is also exerting pressure on ruble. Russia is one of the world’s largest oil exporters, and lower oil prices means that the Russian government receives less revenue through oil exports. This is reducing the government’s ability to prop up the ruble.

Third, the Russian Central Bank has restricted its ability to interfere in the foreign exchange markets. In the recent past, the Russian central bank could use its foreign exchange reserve to buy rubles in order to support the currency. However, the central bank’s foreign exchange reserves have been depleted by the war in Ukraine.

These factors have led to ,…