Despite Exceeding Psychologically Detrimental 105 Threshold, USDRUB Doesn’t Offer Any Fundamental Reasons to Stop Devaluation for Now

RUBUSD continued to weaken, with USDRUB reaching 105.40 as of today, November 26. The Russian currency is now at its lowest level against USD since March 2022, when Russia launched its special military operation. 

Meanwhile, CBR’s M2 Money Supply aggregate increased by 1.3% as of September (the latest available data). The annual growth rate of M2 accelerated to 18.8% (17.9% in August), of monetary aggregate M2X excluding currency revaluation — to 15.4% (14.5% in August).

On top of that, Fx traders are becoming more concerned after the U.S. imposed new restrictions on Russia's Gazprombank — the only bank previously excluded from the blacklist for trading energy resources with Europe for the purpose to keep the continents’ gas supply sufficient for its basic needs. Once again, until last week, Russia's Gazprombank was the last major Russian bank not blacklisted by the U.S. The new restrictions limit Gazprombank's ability to participate in foreign trade and also prevent the bank from conducting transactions related to energy trade. That means Europe-related Russia's energy revenues fell by nearly a quarter last year, due in part to Western trade restrictions, including a $60-a-barrel cap on the price of Russian exported oil.

So far RUBUSD has fallen 14% YTD, largely due to Russia's long list of growing fiscal problems. Despite high interest rates that typically boost the value of the national currency, consumer inflation continues to rise, while the long-term growth prospects for the economy remain lukewarm. Some economists also predict that the country may be on its way to entering a period of stagflation. New sanctions According to Bloomberg, the European Union is proposing to impose restrictions on 45 Russian oil tankers, 50 individuals and 30 companies as part of its 15th package of sanctions against Russia.