(Bloomberg) -- Fresh US sanctions against Russian banks have caused a further slide in the ruble, putting at risk some of the last channels of direct foreign-currency flows into the country.
The ruble has fallen almost 8% against the dollar since November 21, when the US sanctioned some 50 Russian banks with connections to the global financial system. On Wednesday, the currency went beyond 108 per dollar after passing 105 the day before, the weakest levels since March 2022 during the aftermath of the first sweeping sanctions over the invasion of Ukraine.
The targets of the new penalties included Gazprombank, which serviced international payments for key Russian gas exports.
“Market participants are actively buying foreign currency to promptly make payments to counterparties,” said Evgeny Loktyukhov at Promsvyazbank. “Sanctions are creating concerns that in the near future, currency inflows from exporters may be limited.”
The Bank of Russia has used interbank transactions to calculate the rate since June, when the US sanctioned the Moscow Exchange — which immediately halted dollar and euro trading. On Wednesday, the bank also said it wouldn’t purchase foreign currency on the domestic market until the end of 2024 in order to reduce volatility in financial markets.
Since the beginning of this year, the Russian currency has dropped by more than 19% versus the dollar, central bank data shows. It also lost almost 18% against the Chinese yuan.
Russian exporters and importers have been suffering from difficulties with international payments since the end of 2023, when the US intensified pressure on friendly countries through a threat of secondary penalties against financial institutions working with Russia.
As a result, direct payments to and from Russia’s main trading partners have mostly ground to a halt. Russia still conducts a thriving trade in commodities via intermediaries, often paid in rubles.
New rounds of restrictions may complicate foreign trade transactions even more and reduce incentives for bringing foreign-exchange liquidity into Russia, Rosbank analysts wrote in a note.
“The current trend of a weakening ruble may prove sustainable on the horizon of 2025,” Rosbank wrote. Prior to Wednesday’s central bank statement, the analysts forecast the ruble may reach 119.8 versus the dollar next year due to geopolitical tensions and the lack of incentives for authorities to limit exchange-rate volatility.
--With assistance from Greg Sullivan.
(Updates with Wednesday’s ruble level in second paragraph, and additional detail in the fifth paragraph.)
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