Revised USD/RUB Forecast Path by Commerzbank Economists
Share this Article:
The currency exchange rate of the US Dollar (USD) to the Russian Ruble (RUB) has been a topic of keen interest to global economists and investors. It has been largely impacted by dynamic factors such as economic sanctions, global financial markets, and political events. In this discussion, we specifically delve into the recent revision in the forecast path for this currency pair by economists at Commerzbank, the reevaluation made due to substantial weakening of the USD/RUB exchange rate.
Shift in USD/RUB Forecast Path by Commerzbank
Recently, economists at Commerzbank have revised their USD/RUB forecast path higher this month. This move was triggered after the exchange rate weakened significantly and reached their end-2024 target of 90 prematurely. This implies that the Russian Ruble weakened against the US Dollar faster than initially presumed by the economists.
Table 1: Commerzbank’s Revised USD/RUB Forecast Path
| Old Forecast (End-2024) | New Forecast (End-2024) |
|---|---|
| 90 | 120 |
The above table displays the revised USD/RUB forecast path by Commerzbank. The new forecast predicts a lesser value of the Ruble against the US Dollar by the end of 2024 compared to the previous prediction.
Key Factors Affecting the USD/RUB Exchange Rate
Currently, the USD/RUB exchange rate is primarily being driven by the current-account balance. Here’s why:
- Economic Sanctions: Due to the sanctions, the Ruble exchange rate now only reflects current account flows. It no longer efficiently encapsulates other economic indicators or currency fundamentals.
- Declining Current Account Surplus: The Ruble is likely to depreciate medium-term due to the declining current account surplus. If the surplus continues to decrease, the Ruble may weaken further.
Russia’s Central Bank Response
Russia’s Central Bank (CBR) has indicated that it is concerned about the upside risk to inflation, which is partly a consequence of the weaker exchange rate. Subsequently, the bank has decided to start a rate hiking cycle beginning its 21 July meeting. However, these rate hikes do not have direct foreign exchange implications at the moment.
Chart: Russia’s Central Bank’s Rate Hiking Cycle
Source: Commerzbank Research
In conclusion, the dynamics of the USD/RUB exchange rate continue to evolve under the influence of a range of complex factors. With the recent revision in forecast by Commerzbank and Russia’s Central Bank’s response to the situation, investors, stakeholders, and economists worldwide are closely observing the development of this scenario.