The Central Bank has assessed the impact of new sanctions on the ruble exchange rate for the first time.

New Western sanctions against Russian banks have required businesses to "adjust their handling of foreign trade flows" and have led to increased volatility in the foreign exchange market, but this is a short-term factor for the ruble exchange rate, the Central Bank reported in its Financial Stability Review.

The regulator assessed for the first time the impact of the large-scale restrictions imposed by the US Treasury on November 21 against 52 credit institutions, including the systemically important Gazprombank (GPB), which handled payments to foreign consumers of Russian gas. Within days, the ruble surpassed the crucial psychological benchmarks of 100 to the dollar and 110 to the euro, falling back to its 2022 lows. The sharp weakening of the national currency necessitated the intervention of the Central Bank: on the evening of November 27, the regulator announced a halt to foreign currency purchases on the domestic market until the end of the year, mirroring the Treasury's fiscal rule operations.

"As previous sanctions episodes have shown, restrictions create infrastructure problems for foreign economic activity, but in the medium and long term, exchange rate dynamics are determined by fundamental factors," the Bank of Russia's review states.

The Central Bank does not provide any forecasts for the ruble exchange rate, but it does mention in its review the impact of previous serious sanctions on the local currency market.

In June 2024 , the United States imposed restrictions on the Moscow Exchange, the main infrastructure organization through which organized foreign exchange trading in RUSSIA was conducted. Following this, dollar and euro trading on the exchange was suspended, and the yuan became the primary exchange currency. Transactions with American and European currencies are now conducted on the over-the-counter market, and the Central Bank uses data from the banks organizing such transactions to set official exchange rates for dollars and euros.

“The flow of liquidity from the exchange to the over-the-counter market and the reduction in the relationship between them led to a temporary increase in the spread between the cross rate"The spread between usd /CNY (US dollar/Chinese yuan) on the Russian market and USD/CNH on the international market (the yuan was weaker on the Russian market) was weaker. In June-July 2024, the spread did not exceed 2%, but by August it had widened significantly, reaching 10% at its peak," the Central Bank notes. However, as the report emphasizes, by September, three months after the sanctions, the market had already adapted to the "introduced infrastructure restrictions," and the exchange rate relationship between the Russian and international markets had normalized.

"Currently, the spread between the USD/CNY cross rate on the Russian market and the USD/CNH on the international market does not exceed 0.5%," the Bank of Russia concludes.

"In our view, the measures taken so far are sufficient; we see signs that the situation is stabilizing. It's important that we maintain our policy regarding the floating exchange rate, its value for stabilizing both the economy and external conditions, and balancing the interests of exporters, importers, and other economic participants. At the same time, if short-term volatility caused by payment problems poses a threat to financial stability, we have a sufficient arsenal of measures to mitigate the situation," said Central Bank Deputy Chairman Filipp Gabunia at a briefing.

"We still know that the key rate creates additional appeal for ruble assets, and it also dampens demand across the economy overall and for imports in particular , thereby reducing demand for foreign currency. Therefore, in this respect, the key rate is effective, and we don't need to take any emergency measures," he added.