The official Exchange rate of the Russian ruble (RR) against the Tajik national currency, the somoni (TJS), has fallen 4.7% over the past week.
In exchange offices of Tajik commercial banks, the rate has reportedly dropped to the psychological threshold of 100 somonis per 1000 rubles.
As of November 27, the National Bank of Tajikistan has set the exchange rate of the Russian ruble against the somoni at 1:0.1013. On November 20, the RR/TJS exchange rate was 1:0.1063. At the same time, commercial banks have been exchanging the Russian currency at a rate of RR1000 for TJS100.
Since the beginning of this year, the Russian ruble has lost 19.2% of its value against the somoni (from 1:0.1217 on January 1, 2024).
The decline in the ruble’s exchange rate against the somoni is occurring amid the ruble’s devaluation against the US dollar.
The official exchange rate of the Russian ruble weakened past 100 to the U.S. dollar for the first time since October 2023 after President Vladimir Putin lowered the nuclear strike threshold in escalating tensions with the United States over Ukraine.
Russia's ruble continued to weaken against the dollar on Monday, trading at 104 against the greenback. The currency is now at its weakest level versus the dollar since March 2022, when Russia launched the so-called “special military operation” in Ukraine.
On November 27, 2024, the official exchange rate of the US dollar against the Russian ruble ws set at 1:105.06.04. Over the past week, the value of US dollar has remained relatively stable, with an 8.998-percent increase compared to its value 7 days ago.
During the past week, the exchange rate of the US dollar to the Russian ruble has fluctuated between a high of 109.688 on November 27 and a low of 100.190 on November 20.
According to RBC, the trend of the ruble weakening is visible both in daily updates on the Bank of Russia's website and in unofficial market trading.
“Currently, the dollar has effectively reached levels it held during the currency crisis in March 2022. If we evaluate its dynamics based on the regulator’s data, since November, the national currency has lost more than 8% in value, and since the beginning of 2024, it has depreciated by over 16%,” RBC writes.
The depreciation of the ruble against the somoni has a negative impact on the income of Tajik migrant workers in Russia. At the beginning of this year, recipients of money transfers in Tajikistan received 121.7 somonis for every 1000 rubles, but now they receive only 100-101 somonis.
According to various estimates, there are approximately 1.5 million Tajik citizens living and working in Russia, according to various estimates.
According to the World Bank, in 2023, the flow of remittances to Tajikistan reached US$5.7 billion, which is a 6.6% increase compared to 2022. Over 90% of these remittances are in rubles.
Why is the ruble depreciating?
Leading analyst at the investment company "Tsifra Broker" Natalia Pyryeva told RBC that the main reason for the ruble’s fall is a liquidity shortage amid shrinking export flows (due in part to worsening oil market conditions) and the rise in imports at the end of the year due to the upcoming New Year holidays.
In addition, Pyryeva believes that new sanctions have also contributed to the ruble’s decline. According to her, these sanctions may complicate the processing of export payments as they affect the financial infrastructure that services Russia’s raw material exports.
Another reason for the ruble’s weakening is the strengthening of the US dollar following Donald Trump's victory in the US presidential elections. Since November, the futures on the dollar index for December delivery on the ICE exchange have risen by 2.9%.
Analyst at the financial group "Finam" Nikolai Dudchenko points out that the Russian currency has few strong counterbalances against depreciation. "The Bank of Russia has already stated that a high interest rate should restrain imports, which would prevent the ruble from weakening. However, the interest rate is no longer having the same effect," he said.
Alexander Shneiderman, head of the sales and client support department at "Alfa-Forex," told RIAMO that several factors are currently contributing to the ruble’s weakening.
Among them, the main factors are: seasonal capital outflows; the easing of requirements for exporters to deposit their foreign exchange earnings into special accounts in Russian banks (which have been reduced to 40% since August); the simultaneous decrease in exports and growth in imports.
Meanwhile, Deputy Chairman of the State Duma (Russia’s lower chamber of parliament) Committee on Economic Policy Mikhail Delyagin explained the ruble’s fall to Lenta.ru by the Central Bank of Russia's decision to raise the key interest rate.
"This is due to the policy of the Bank of Russia. Because raising the key interest rate amid an artificially created liquidity shortage leads not only to accelerating price growth but also to ruble devaluation. We’ve experienced this many times, both in 2014 and in the second half of last year," he added.
Six key reasons for the ruble’s fall in 2024
After analyzing various factors, Russian financial experts have identified six main reasons for the ruble's depreciation in 2024:
- Sanctions against Russian companies and banks. These sanctions have reduced demand for the ruble and increased interest in the US dollar.
- Victory of Donald Trump in the US presidential elections. The expected tightening of monetary policy in the US has led to increased demand for US securities and dollars.
- Increase in the Central Bank's key interest rate. This slows down economic development, makes investment projects unprofitable, and leads businesses to abandon them. As a result, the only place for mass investments is the foreign exchange market. With the surge in demand for currency, the ruble's exchange rate falls.
- Decrease in exports and growth in imports. Prices for Urals oil dropped below $70 per barrel in mid-October, reducing currency supply. At the same time, demand for currency can increase due to growing government spending and a pre-holiday surge in consumer activity.
- Reduction in the repatriation of foreign currency earnings. Exporters are sluggish in selling currency on the domestic market after the government eased requirements.
- Demand from non-residents. Financial institutions are noticing demand for currency from portfolio investors who are non-residents.
