The dollar rose by 0.9% and reached RUB76 to the dollar during the trading session on the Moscow Exchange on August 26.

The euro added 0.5% and climbed to RUB89.61.

Brent oil futures with delivery in October 2020 gained 0.2% to $45.95 per barrel on the London-based ICE at the same time. WTI oil futures rose by 0.67% to $43.64 a barrel.

Tim Ash, senior sovereign strategist at BlueBay Asset Management, says the weakness of the ruble is due to a combination of factors, including:

* US election risk – Biden is expected to be more hawkish on Russia;

* Belarus risk – concern Russia will intervene directly in the crisis;

* Navalny risk – concern Russia is somehow subject to Western sanctions related to this case.

* Positioning – foreigners have long been Russia risk.

However, the macro fundamentals supporting the ruble remain strong. The credit default swaps (CDS) curve has also improved in counterpoint to the currency that has been weakening. Russia’s reserves have risen some $40bn this year and topped $600bn in August, well above the Central Bank of Russia (CBR) “comfort level” of $500bn.

Falling exports is one of the factors pulling the ruble down. Russia’s foreign trade surplus fell 41.8% on the year to $54.1bn in January-June, the Federal Customs Service said on August 10. Exports decreased 22.5% to $161bn, while imports slid 6.8% to $106.9bn.

Despite the fall in exports Russia is still expected to run a current account surplus this year. Previously the CBR feared the current account could fall into the red, but following the recent recovery of the oil prices to c$45 the central bank revised its forecast and is now expecting a surplus of the order of c$45bn.

Foreign investment into the Russian Ministry of Finance ruble-denominated OFZ treasury bills has also been a source of inflows that has helped the ruble, but has been marked by modest selling recently.

In August the non-resident share of OFZ fell from 30.6% in July to 29.9%, or a total of RUB3,053bn from a total of RUB10,244bn outstanding bonds. However, despite the recent outflows the bonds remain popular with foreign investors and the non-resident holding still remains well above the RUB2,870bn that non-residents started the year with.