How the ruble’s depreciation was stemmed
As soon as the war started:
- The Bank of Russia imposed strict capital controls, introduced a 30% commission (later reduced to 12%) on foreign-currency purchases, and hiked its key policy rate from 9.5% to 20%;
- Russia’s government ordered all Russian exporters to repatriate and exchange 80% of their export revenues for rubles while various categories of buyers were banned from purchasing US dollars, and holders of foreign-currency-denominated bank deposits faced major constraints withdrawing their savings.
In the short term this swift policy response didn’t succeed in stemming the ruble’s depreciation: the official exchange rate moved from 81 rubles per dollar before the war to 139 per dollar on March 9. In addition, inflation accelerated substantially, with the growth rate of the official consumer price index rising to 2% per week. But today the ruble has returned to the 80-per-dollar range!
Today’s exchange rate indicates that Russia’s balance of payments is strongly supported by current oil prices, which implies that fiscal performance is holding up well, too. While the early sanctions froze much of Putin’s stock of cash, high oil prices have ensured substantial daily inflows.
The Incredible Bouncing Ruble
By: Sergei Guriev – SciencesPo
The Bank of Russia and its reserves
Patrick Honohan argues that the Bank of Russia resorted to incredible measures in order to stem and reverse the fall of the ruble because for Putin there is a symbolic political value of stabilizing the dollar value of the Russian currency. But what happened to the Bank’s reserves is unclear:
As soon as the fighting began, the Bank of Russia stopped publishing its weekly statistics on reserves. It was not immediately clear whether this bounce-back resulted from the bank using unsanctioned reserves in massive market intervention (as it had in similar circumstances during 2014). Last week, though, for unknown reasons the bank reversed course and started publishing reserves data again. Reserves have fallen about $40 billion since the eve of the war, but the weekly pattern of the fall is intriguing. Most of it occurred before March 4, while the ruble was still weakening. During the following three weeks, when the ruble recovered, the net fall in Russia’s reserves was less than $5 billion—less than 1 percent of the total.
Russia’s ruble actions are monetary theater of the absurd
By: Patrick Honohan – Peterson Institute
Sanctions and the demand for dollars
Itskhoki and Mukhin in this note argue that sanctions have also lowered demand for dollars, which are needed to purchase imported goods, thereby driving the ruble’s exchange rate upward. But that is not good news for Russia’s economy, which is bound to slow down.
Sanctions and the Exchange Rate
Authors: Oleg Itskhoki, Dmitry Mukhin
From: UCLA, LSE
