Alexey Vedev, Senior Researcher at the Financial Sector Department of the Gaidar Institute identified one of the key factors influencing the Russian currency’s exchange rate amid the ruble’s ongoing weakening.
The expert noted that since the resumption of such operations in May, the Ministry of Finance, through the Bank of Russia, has been creating additional demand for foreign currency in the domestic market. This puts pressure on the ruble alongside seasonal factors that traditionally emerge in August.
“Operations under the budget rule are currently one of the most significant factors for the foreign exchange market. In effect, the government is increasing demand for foreign currency, which affects the ruble exchange rate. At the same time, the fundamentals look more favorable: judging by the dynamics of the current account, the supply of foreign currency in Russia has consistently exceeded demand in recent decades. From this perspective, the ruble has grounds to be stronger than what we are seeing now,” — Alexey Vedev told RBC.
According to the economist, the current exchange rate dynamics are shaped by several factors at once. In addition to the traditional summer increase in demand for foreign currency, fiscal policy decisions are having an impact, altering the balance of supply and demand in the domestic foreign exchange market.