Due to the sanctions, the RUB exchange rate now only reflects current account flows. Hence, the Ruble is likely to depreciate medium-term due to the declining current account surplus, eeconomists at Commerzbank report.

RUB exchange rate now only reflects current account flows

“Russia’s capital account is closed for major hard currencies. The absence of capital flows means that the exchange rate does not perform its forward-looking role based on expectations – it only reflects day to day trade flows, much of which is energy trade.”

“In the longer-term, Russia’s current-account will drift more towards neutral (from surplus) which points towards weaker RUB levels.”

“Fundamental factors are less relevant for the Ruble due to the closed capital account.”