Ruble hits 8-month low against dollar as falling oil prices and sanctions weigh

London
CNN
—

The Russian currency hit an eight-month low on Thursday, adding to sharp declines in December as global oil prices fell and Western sanctions targeted Russia’s energy sector.

The ruble has hovered below 72 to the dollar, down 18% since the start of the month, and its weakest level since late April.

After nearly halving in value during the first weeks of the war, the ruble held up remarkably well for most of the year, trading in a tight range. The ruble was helped by measures by the Russian central bank, which more than doubled interest rates at the start of the war, introduced capital controls and forced exporters to convert 80% of their income into rubles, creating artificially a demand for money. He then reversed some of these policies when the exchange rate stabilized.

But with the price of oil, Russia’s biggest export, down about a third from its June peak, and an EU embargo on oil transported by sea, and Western mechanisms of With the price cap now in place, Russia’s oil export revenues are expected to fall. This means less foreign currency to support the ruble.

The International Energy Agency said this month that Russian oil export earnings fell by $700 million in November due to falling prices.

President Putin this week signed an executive order banning oil sales to countries or entities adhering to the price cap, and his deputy prime minister has warned that the country may have to cut oil production by up to 7% in 2023.

Russian Finance Minister Anton Siluanov said on Thursday that the exchange rate was stabilizing, although “small fluctuations” remained.

“The fact is that our imports are increasing,” he told Russian state television in an interview broadcast on Thursday. “Our exchange rate is floating and depends on the balance of payments situation.”

He said Russia’s new fiscal rule in effect from next year would allow it to use excess oil revenue to stabilize the currency if needed.