According to the Moscow Stock Exchange, the euro was priced at 100,542 rubles and the dollar at 92.0691 rubles at 14:23 Moscow time on December 21.
Since the start of the week, the ruble has weakened by about 2 percent against both the dollar and the euro. Sovcombank chief analyst Mikhail Vasiliev explains that in recent years December has seen the ruble slip by roughly 2% on average against the dollar. He notes that the year-end rise in exchange rates is tied to seasonal demand for imported goods and foreign travel.
“December is historically the period of the year with the highest budgetary outlays. That increases the supply of rubles on the market. Some rubles are used to buy imports, others to purchase foreign currency. Additional pressure comes from accelerating inflation and the outflow of funds by residents and businesses abroad. Capital withdrawal tends to peak at year end when dividends and bonuses are paid,” Vasiliev says.
The fact that many Russians travel abroad for the New Year holidays also pushes up demand for foreign currency in December.
“Additionally, some financial market players may step up foreign exchange purchases to weather the long New Year holidays,” the expert adds.
Private investor Fyodor Sidorov attributes the rise in the dollar and euro to a sharp drop in foreign exchange earnings after exporters complete tax payments in November 2023, along with downward pressure from low oil prices on the ruble. A standard barrel of North Sea Brent oil is priced around $79–$80 on the London ICE exchange, a level linked to disruptions in transporting energy resources via the Red Sea after attacks on vessels by the Yemeni Houthis.
In contrast, Mikhail Zeltser, a stock market expert at BCS World of Investments and a Candidate of Economic Sciences, ties the euro and dollar gains to speculative activity in a pre-holiday, low-liquidity market in Russia. With cash withdrawals rising ahead of the New Year, trading turnover shrinks and speculators test exchange rates.
“Speculative moves also reflect the maturity days of derivative contracts on the stock exchange, including futures and options. The execution and dynamics of fixed-term contracts today may not be indicative. A strictly technical market reason is also possible,” Zeltser notes.
When might the dollar and euro ease?
The economist does not rule out a quick bounce in the dollar to around 90 rubles and the euro to about 98 rubles. Yet Vasiliev expects the dollar to end the year around 89–94 rubles and the euro around 98–103 rubles.
“Perhaps the euro will touch 102 rubles, but there is strong resistance above that level,” BitRiver’s Andrei Loboda observes, suggesting the euro could dip to roughly 96–98 rubles by year end 2023.
Sidorov predicts the euro at 103 rubles and the dollar at 98–99 rubles, adding that there may be no rate cuts before the New Year weekend.
Loboda advises buying foreign currency when rates retreat, noting a chance for the euro to fall to 96–97 rubles and the dollar to 89–90 rubles. “Right now it can be profitable to sell dollars and euros as rates rise, but a downside correction to buy is a prudent move. Still, buying dangerous currencies as stores of value remains risky. If travel abroad is planned, purchase the currency needed for the trip,” Loboda explains.
What could strengthen the ruble?
Vasiliev points to several supportive factors for the ruble, including the presidential decree mandating the sale of foreign currency earnings by major exporters and a higher key interest rate. The Central Bank’s last meeting of the year, held on December 15, saw the basic rate raised by 100 basis points to 16 percent per annum. Higher rates raise the cost of credit, cooling consumer and investment demand, including imports, and reducing demand for foreign currency. Higher deposit rates and bond yields also make ruble savings more attractive, which strengthens the ruble.
Next week, the ruble is expected to receive support during the December tax period. “All exporters will convert their foreign exchange earnings to align with the budget. Russian companies must pay several taxes, such as mineral extraction tax, VAT, personal income tax and others, by December 28,” Vasiliev concludes.