Russia’s currency crisis deepens as the ruble remains battered and its central bank struggles to stem further declines. Despite a brief recovery from earlier lows, the ruble has tumbled 9% against the US dollar since November 21, when Western sanctions were imposed on Russian banks.
The central bank set the official rate at around 108 per US dollar, but this still represents a value lower than a penny. The decline in the ruble’s value is expected to boost exports by making them cheaper, but it will likely fuel inflation further by increasing import costs.
Western nations have cut off trade with Russia, while China has filled the gap as an importer of Russian products. However, a shortage of yuan, the most traded foreign currency in Russia, has also become a concern. The Kremlin’s sovereign wealth fund has been depleted to prop up the ruble, leaving it with limited firepower to counter another currency collapse.
The fund’s liquid assets stood at $55 billion as of last month, down from $140 billion before Russia invaded Ukraine in 2022. The central bank can hike interest rates further to combat inflation, but this would tighten the economy even more. With energy prices falling amid weakening global demand, Russia’s economy is becoming increasingly vulnerable.
Analysts predict that the economy will struggle to sustain President Putin’s war on Ukraine beyond next year. Russian factories are unable to produce enough key weapons systems, and old Soviet stockpiles are running out. As a result, the currency crisis is expected to worsen, with the ruble likely remaining in decline until further support measures can be implemented.
Source: https://finance.yahoo.com/news/russia-ruble-still-worth-less-202142459.html