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Overview of Russian Ruble's Performance Against End of Volatile Year

As the year came to a close, the Russian ruble strengthened on Friday, heading towards the 71 mark against the dollar.

Russian ruble on 100 dollar bills
Russian ruble on 100 dollar bills

The final month of trading was marked by concerns about the impact of a Western oil price cap on Russia's export revenues, which caused the ruble to hit an eight-month low of 72.9175 in the previous session. However, at 0708 GMT on Friday, the ruble was 1.3% stronger against the dollar at 71.22.

Ruble's Performance Against Against Western Oil Price Cap

The implementation of the Western oil price cap on Russian exports on December 5th has resulted in the ruble losing around 13% of its value against the dollar. Despite this, analysts have stated that the technical impact of the price cap on the ruble will be more strongly felt in January and February. In contrast, the ruble gained 0.6% against the euro, trading at 75.54, and firmed 1.7% against the yuan, at 10.01.

Russian Finance Ministry's Response to Ruble's Weakness

In response to the ruble's weakness, the Russian finance ministry announced on Friday that the maximum possible share of Chinese yuan in its National Wealth Fund (NWF) would be doubled to 60%. This restructuring of the NWF aims to reduce Russia's dependency on currencies from so-called "unfriendly" nations.

Factors Contributing to Ruble's Weakness

The collapse of recovering imports, caused by Russia sending troops into Ukraine and the resulting Western sanctions and companies leaving the market, has also contributed to the ruble's weakening. However, Dmitry Polevoy, head of investment at Locko Invest, stated that "even in a pessimistic scenario, the current account surplus could remain at a historically high level, providing the ruble some support." Polevoy added that estimates for the ruble's average value against the dollar in 2023 range from 67.4 to 81.1.

Russian Stock Market Performance

As the ruble saw a strengthening on Friday, Russian stock indexes were also higher. The dollar-denominated RTS index rose 1.6% to 951.8 points, while the ruble-based MOEX Russian index was 0.2% higher at 2,151.1 points. The global benchmark for Russia's main export, Brent crude oil, was up 0.6% at $84.0 per barrel.

Putin's Response to Western Oil Price Cap

In response to the Western oil price cap, Russian President Vladimir Putin signed a decree this week that bans the supply of crude oil and oil products from February 1st for a period of five months to nations that abide by the price cap.