Ruble’s Prospects and Destiny: No Apparent Solver for Difficult Exchange Rate Formula

Restrictive measures for the purchase of foreign currency for individuals and legal entities, as well as collapse of international tourism and a sharp decrease in demand for imports, are factors propping up and somewhat stabilizing the ruble exchange rate, which precipitously collapsed when Russia began its military operation in Ukraine on Feb. 24, for the time being. However, the consensus among the majority of Fx analysts see it very likely that the Russian currency will continue to be highly volatile this month and, probably, thereafter.

From technical standpoint, since the end of first week of March USDRUB has been hovering within a tight band 113.31 – 120.27, and now its resistance level sits at as low as near 105 rubles per USD – something that looks unattainable under current circumstances.

The Central Bank of Russia, CBR, announced new measures restricting access to cash: until September 10, 2022, the financial watchdog limited the remittance of foreign currency (U.S. dollars, euros, yen, pounds sterling) to institutional residents and individual entrepreneurs to the amount of $5,000. Non-resident legal entities and non-resident individual entrepreneurs will no longer be able to obtain the listed currencies in cash. However, other currencies are available without restrictions at the corresponding market exchange rates on the day of a transaction.

So far, there’s little argument that ruble has already bottomed out, but the main question is if the history won’t repeat itself – at least, as farce. The prospects for the ruble are a balance of pressure on the exchange rate from subjects of economic activities who tend to bulk into foreign currency, and foreign exchange earnings, 80% of which Russian exporters are required to convert in rubles, according to the new law. In the first part of the equation, a lot has been done, capital controls have been de facto introduced. But in the second part of the equation, nothing is as much evident. Disruptions in supply chains and other factors make it difficult for exporters to trade under current circumstances.