Episodes of “Black November”: The Trump Factor, Sanctions, and Liquid Currency

The fate of the Belarusian ruble concerns not only financial analysts. For ordinary citizens, this issue often boils down to a simple dilemma: buy or sell? On January 1, 2024, the official exchange rate was 3.1775 BYN/USD. Today, it stands at 3.5951 BYN/USD (-13%). Over a third of this depreciation occurred in November. What will the exchange rate be at the year’s end? There’s no answer key, making the “volatility spike” in the Russian currency market particularly noteworthy.

Some analysts sympathetic to the Belarusian ruble argue that the dollar’s growth potential has been largely exhausted. They suggest there are no significant internal reasons for a major collapse of the national currency (though this is not entirely accurate—take, for instance, the surge in consumer activity ahead of the New Year, which drives imports). The November weakening of the ruble stems primarily from two external factors:

• The rapid strengthening of the US dollar against most global currencies;
• The sharp devaluation of the Russian ruble, given the Belarusian currency market’s 100% correlation with Russia’s.

Since early November, the Russian ruble has lost over 10% of its value against the dollar. As of November 28, the official Central Bank exchange rate was RUB 108.01. Meanwhile, on the international Forex market, the USD/RUB pair occasionally exceeded RUB 114. The weakening of the Russian ruble has prevented the Belarusian currency basket from becoming cheaper. Its cost increased by 0.34% in November (and only 0.86% since the start of the year), driven by the continued rise of the US dollar and Chinese yuan.

The dollar’s strength is linked to Donald Trump’s victory in the US presidential election. Reforms by the new White House administration are expected to tighten monetary policy, bolstering the global dollar and fueling the continuation of the “Trump rally” in the Russian currency market.

The most immediate factor affecting exchange rates is the new wave of sanctions against Russia’s financial sector. On November 21, the US Office of Foreign Assets Control (OFAC) announced updates to sanctions packages. These measures targeted over 100 organizations and individuals, primarily banks, registrars, and elements of financial infrastructure serving Russia’s commodity exports.

The Russian Central Bank responded simply and decisively by suspending currency purchases on the market due to volatility. The ruble then hesitated—fall further or hold steady? Subsequently, the regulator reassured nervous market participants, stating that the new sanctions had forced businesses to “adjust external trade flows” and caused increased market volatility, but that this was a short-term factor for the ruble’s exchange rate.

In addition to the “Trump factor” and other external challenges for the Russian ruble, analysts cite internal reasons shaping the new exchange rate reality. Among these is an acute liquidity shortage caused by shrinking export flows (including due to unfavorable oil market conditions) and a surge in imports ahead of Christmas and New Year’s celebrations.

Another significant trend is the “opportunistic” behavior of key currency market players, though it is difficult to quantify the speculative component in the exchange rate process. Interestingly, exporters and the state budget benefit from a weaker ruble. Exporters earn in foreign currency but pay taxes in rubles, and a stronger dollar means higher tax revenues for the budget in ruble terms. The Belarusian government also appears untroubled by the weakening Russian ruble, as it settles imports from Russia (e.g., energy resources) in rubles. These benefits are relative, however, as the BYN tends to mirror the RUB with a certain time lag.

Currently, the Russian currency faces few strong barriers to further weakening. Consequently, analysts closely monitor the dynamics of “liquid currency.” Oil and gas revenues account for 30% of Russia’s budget, meaning oil prices directly impact foreign currency inflows and, consequently, the supply of foreign currency on the market. It is generally believed that the ruble’s outlook could worsen if Brent crude drops below USD 70 per barrel and improve if it rises above that threshold.

Surprisingly, publicly available forecasts for the Russian ruble do not anticipate a particularly grim scenario. Was this merely a “volatility spike”? In the worst case, the US dollar is expected to trade at around RUB 115 by year-end, corresponding to approximately BYN 3.53—levels that have already been reached or surpassed. Will oil prices rise? Will some “depressive” exchange rate factors lose their influence (see “The Dollar Falling Up: New Exchange Rate Realities or Currency Normality?”)? Finally, history shows that the Belarusian ruble tends to weaken on the eve or immediately after presidential elections in the country.

Perhaps what’s missing here is a truly pessimistic scenario.