The Ruble in September: Between Geopolitics and Central Bank Rates

September promises to be a challenging month for the Russian currency. Right now, we're witnessing a unique combination of factors that could significantly impact the ruble's exchange rate—and not all of them favor strengthening the national currency.

The first thing worth noting is the geopolitical situation. Recent negotiations between Putin and Trump in Alaska, followed by talks between Trump and Zelensky in Washington, have failed to deliver the expected clarity. On the contrary, a pause has emerged that could give way to a fresh wave of tensions and threats of sanctions. Currency markets are traditionally sensitive to such signals, and any escalation in rhetoric could weaken the ruble.

The second critical factor is the Bank of Russia's key rate decision on September 12. July's inflation data (8.5% seasonally adjusted) and rising inflation expectations among the population are narrowing the regulator's room to maneuver. If the Central Bank does decide to cut rates by 200 basis points, this could provide momentum for a moderate weakening of the ruble. The mechanism is straightforward: cheaper credit stimulates imports, which increases demand for foreign currency.

It's also worth noting the government's decision to eliminate mandatory currency sales requirements for exporters. This decision, made against the backdrop of exchange rate strengthening and stabilization, could theoretically reduce currency supply in the market. However, exporters voluntarily sold 80-90% of their proceeds over the summer when the requirement was only 40%, so removing the mandatory sale may not have a significant impact.

Considering all these factors, the most likely scenario for September appears to be a trading range of 80-84 rubles per dollar. That said, we shouldn't lose sight of the broader dollar index dynamics: if the U.S. currency continues to weaken against global currencies, this could partially offset domestic pressures on the ruble.

In my view, September will be a month that lays the foundation for currency dynamics throughout the remainder of the year. And here, much will depend not so much on technical factors as on the geopolitical landscape and the Central Bank's determination to continue rate cuts amid instability.