The Russian ruble plunges to near a 17-month low and surges above 100 against the dollar

• The Russian ruble slipped above 100 against the US dollar on Monday, nearing a 17-month low, as President Vladimir Putin’s economic adviser blamed easy monetary policy for the rapid depreciation.
• The ruble has lost around 30% against the dollar since the turn of the year.
• The Bank of Russia blames the country’s shrinking trade balance, as Russia’s current account surplus fell 85% year-on-year from January to July.

This pool image distributed by the Sputnik agency shows Russian President Vladimir Putin’s meeting with the governor of the Tver region on August 9, 2023 at the Kremlin in Moscow.

Mikhail Klimentyev | AFP | Getty Images

The Russian ruble slipped above 100 against the US dollar on Monday, nearing a 17-month low, as President Vladimir Putin’s economic adviser blamed easy monetary policy for the rapid depreciation.

The ruble has lost around 30% against the dollar since the turn of the year. The Bank of Russia blames the country’s shrinking trade balance, as Russia’s current account surplus fell 85% year-on-year from January to July.

Putin’s economic adviser Maxim Oreshkin told the Russian state news agency Tass that the devaluation will normalize in the near future.

“A weak ruble complicates the restructuring of the economy and has a negative impact on the real incomes of the population. In the interests of the Russian economy — a strong ruble,” he said, according to a Google translation.

The central bank on Thursday halted foreign exchange purchases for the remainder of the year to prop up the currency, raising fears of rising inflation as Russia seeks to fundamentally transform its economy amid increasing isolation and punitive sanctions from the West.

New figures from the Federal Statistical Service on Friday showed that Russia’s GDP beat expectations, growing 4.9% year-on-year in the second quarter, recovering from a 1.8% contraction in the first quarter.

But William Jackson, chief emerging market economist at Capital Economics, pointed out that a limited slack in the economy is likely to add further inflationary pressures and lead to monetary tightening, potentially leading to a slowdown in growth later in the year and through 2024 leads.

“Perhaps the main risk to the economy is that the government will keep fiscal easing to support the war effort, which would result in Russia’s economic vulnerability worsening,” Jackson added.