Why the dollar is falling and where ruble dynamics may lead

Why is the dollar falling?

Since the evening of October 11, the ruble has strengthened against the dollar, euro, and yuan after the government announced a mandatory sale of foreign currency earnings by Russia’s largest exporters. President Vladimir Putin authorized this decree on the same day.

What lies at the heart of Putin’s order?

Putin signed the decree titled On the implementation of compulsory sale of proceeds in foreign currency received by individual Russian exporters under foreign trade agreements (contracts). The measure targets 43 Russian export groups across the fuel and energy sector, metallurgy, forestry, chemicals, and grain production.

Under the decree, individual companies must repatriate funds, bringing foreign earnings back to Russia within six months and then convert those earnings into rubles within the country.

The rules set by the government require exporters to deposit at least 80 percent of their foreign exchange earnings into Russian accounts within 60 days of receipt. They will sell at least 50 percent of each contract’s funds, but not less than 90 percent of the funds credited in Russia.

Sovcombank’s chief analyst Mikhail Vasiliev describes the sale of foreign exchange earnings as a key factor in the ruble’s recent strength. He notes exporters are already following the parameters, which has increased the dollar and euro supply in the market and muted demand from importers. When the supply of currency exceeds demand, the ruble tends to gain ground.

During the October tax period, exporters selling foreign currency to fund the budget provided added support to the ruble until October 30. Higher oil and gas taxes in October, coupled with strong oil prices and quarterly income tax payments, also contributed.

Additionally, the central bank’s decision to raise the key rate by 200 basis points to 15 percent played a role. The market usually reacts with a lag, but this time the ruble rose immediately against the dollar and euro after the regulator’s move. The dollar dipped below 93 rubles and the euro beneath 98 rubles for the first time since May 2023. Investment strategist Alexander Bakhtin of BC World of Investments described the move as largely psychological—the market anticipated a 100 basis point hike to 14 percent, but a tougher step was announced.

Vasiliev explains that a higher interest rate makes borrowing more expensive, cooling consumer and investment demand, including imports. Deposit rates rise and bond yields climb, which can lift demand for the ruble and support its strength.

Thus, the ruble’s exchange rate benefits when demand for the national currency rises.

What lies ahead for the dollar?

Bakhtin suggests that the strong September–October oil prices may have translated into higher sales revenues for exporters. In the near term, the dollar could trade around 91–92.5 rubles and approach 90 rubles by late November as companies adjust currency holdings for New Year tax payments.

In the baseline scenario, Vasiliev expects the dollar to trade around 90–100 rubles by year’s end, with the euro around 97–102 rubles and the yuan near 125–131 rubles. Exporters may slow currency sales early in the month, while importers could ramp up purchases to stock up for holiday and sale season.

There are risks to a weaker ruble, including potential inflation acceleration toward 7.5–8 percent by year-end and higher budget spending. A larger money supply could also push up imports and weigh on the ruble. The Ministry of Economic Development has projected the dollar at around 94 rubles in December 2023, while Vasiliev notes that exchange-rate-linked export taxes help replenish the federal budget when the ruble is strong.

Analysts also point to factors like higher oil prices and possible further administrative steps to keep the ruble strong. Possible measures include tighter capital controls, dividend and loan restrictions abroad, and limits on lending for foreign trade activities. Some scenarios consider raising the rate further to 17–20 percent and using currency sales from reserves to manage the exchange rate.

Vasiliev lists potential administrative moves that could shift the currency picture, such as narrowing capital outflows, a ban on overseas dividends and loans, and restrictions on lending to foreign trade units. While these steps could support the ruble, they would likely come with higher interest costs and tighter financial conditions.

Could the dollar ever reach 60 rubles again?

Vasiliev does not forecast a return to 60 rubles per dollar, a level seen last year after the compulsory sale rules were introduced. The central government and finance ministries project a rate closer to 90 rubles to the dollar in 2024. Still, there is a scenario where a dramatic oil price spike and aggressive currency sales by exporters, paired with relaxed ruble strength measures, could push the rate toward the 60 rubles mark. In such a case, officials might ease the sale requirements to balance the ruble.

Bank DOM.RF’s Grigory Zhirnov believes a move to 60 rubles would require an extraordinary shock. He notes that a return to the roughly 85–90 rubles range per dollar seems more plausible in an optimistic scenario, unless sanctions on imports are tightened dramatically or oil stays very high for a prolonged period. Another expert, Anatoly Trifonov of BC Forex, views both the 60 ruble scenario and a strong rebound as unlikely in the near term.