Russian experts discuss the mysterious recovery of the ruble

In an interview with RT broadcast on May 7, Kopylov said that the West no longer has obligations to Russia after freezing the assets of the Central Bank of this country.

“This is the abolition (like a cultural abolition) of international financial relations rules based on global total return swaps, risk reallocation, asset ownership guarantees, and asset allocation. ownership,” said Mr. Kopylov.

The above rules help determine the former ruble’s exchange rate as well as the approaches to setting it. However, these rules “no longer apply”.

Unexpected recovery, the Russian ruble is expected to continue to appreciate. Photo: BNR

Mr. Kopylov explained that the strengthening of the ruble depends entirely on exports and imports. The value of the ruble is now determined by purchasing power parity (PPP). The International Monetary Fund (IMF) estimates the PPP of the Russian local currency to be 29,127 rubles per USD at the end of 2021.

Kopylov also noted that before Russia was punished by the West for opening a “special military operation” in Ukraine from February 24, the weakening of the ruble was partly due to the impact of capital outflows. In 2021, Russia’s net exports amount to $122 billion. The proceeds from that foreign exchange are used by Moscow to buy foreign assets.

By the time the sanctions took effect, the above capital flow became impossible. Therefore, Mr. Kopylov said that the amount of $ 58 billion that the Russian economy received in the first quarter of 2022 “put pressure” on the appreciation of the ruble.

“Experts’ assessment shows that under these conditions, the ruble can strengthen at 45-50 rubles to buy 1 dollar if there is no adjustment of monetary policy,” Kopylov concluded.

After losing nearly half of its value in March of this year due to Western sanctions, the ruble rebounded unexpectedly, at one point rising to levels not seen in more than two years.

As of May 6, the ruble traded at 69 rubles to 1 USD.