Every resident of Russia constantly uses Russian rubles for any payments within the country. These are settlements with suppliers and contractors, payment for purchases in stores, payment of wages to employees, placement of deposits, issuance of loans, loans, etc.
The Russian ruble is the currency of the Russian Federation, as it is written in the Constitution of Russia.
What is the exchange rate?
In addition to the ruble, there are more than 150 other currencies in the world. Everyone who had to go abroad or buy goods for foreign currency was forced to exchange Russian rubles for the necessary banknotes of another state at a certain ratio.
The value of the Russian ruble, denominated in a certain number of monetary units of another country, is called the exchange rate, that is, the exchange rate of the ruble to this currency. For example, 1 ruble = 0.016 US dollars. This is the exchange rate of the Russian Federation to the US dollar. Although it is more common for everyone to perceive the rate of the dollar against the ruble because of the relative cheapness of the latter. The exchange rate is also called its quotation.
Bank ruble rate
The official exchange rate of the ruble to other currencies is dealt with by the Central Bank of the Russian Federation (CBR). The main working currency of the Central Bank of the Russian Federation is the Russian ruble.
The Bank is the main regulator of the national currency and controls it, avoiding sharp fluctuations. The course is formed with an accuracy of 4 decimal places. Such accuracy is important when converting, exchanging currency in the amount of hundreds of thousands of units or more. Commercial banks of the Russian Federation form their courses based on the rate of the Central Bank.
Exchange rate of the ruble
The Central Bank is one of the active participants in daily currency trading on the Moscow Exchange (Moex, Moscow Exchange), as well as a co-owner of this exchange. Moex is the largest stock exchange in Russia. It plays a decisive role in the formation of exchange rates of major currencies against the ruble. The ratio of supply and demand and other market factors affect the formation of the exchange rate. Bidding is conducted from 9:30 to 19:30 every day.
At approximately 11:30 a.m. each working day, the CBR exchange rates are formed and the weighted average value of the ruble exchange rate against the US dollar, euro and some other currencies is calculated with “tomorrow” calculations.
The exchange rate on the exchange can be very different from the fixed rate of the Central Bank on a specific date.
Currency Convertibility
One of the most significant characteristics of any currency is its convertibility, that is, the ease with which a specific currency can be exchanged for any other world currency in any region of the world. The higher the convertibility, the easier it is to exchange one currency for another.
From this point of view, currencies are divided into:
- Freely convertible. They have no exchange restrictions anywhere in the world. These are the currencies of the most powerful economies in the world. They are common and accepted everywhere. Typical Representatives: US Dollar, Euro, Japanese Yen, British Pound. In the world there are about three and a half dozen of such currencies.
- Partially convertible. These currencies have limited ability to exchange and exchange well only in certain regions. These are banknotes of developing countries. These currencies include most of the monetary units of the countries of the world. The currency of the Russian Federation is a typical representative of limitedly convertible banknotes.
- Non-convertible. Currencies whose exchange is extremely difficult outside the issuing state of the money. The reason may be the weakness of the national economy of the owner of the currency, distrust of the currency and the ability of the state to respond to debts. Example: monetary units of the countries of Central Africa, Oceania.
Exchange rates at the date of the Central Bank of the Russian Federation forms regardless of the convertibility of currencies.
Types of exchange rates
There are various types of exchange rates, depending on the period of establishing the exchange rate, the method of controlling its change and the features of its calculation. Types of national currency rates are as follows:
- Cross course. This is the definition of the exchange rate of one currency against another, expressed through the exchange rate to a third currency. For example, the dollar / ruble exchange rate is 65 rubles, and the euro / ruble exchange rate is 77 rubles. So, the cross rate of the dollar against the euro is 65/77, that is, 0.8442 euros per 1 dollar.
- Fixed on a date or period. This is officially, legislatively fixed by the Central Bank of the country, the exchange rate of the national currency against a specific foreign one. It is embedded in state financial calculations.
- Current rate. This is the price of a certain currency based on market realities. May change daily.
- Floating course. This is the rate that is formed on the currency exchange during the trading session.
A special type of rate is the currency corridor. This is a situation where the Central Bank determines the maximum and minimum boundaries of the national currency against foreign for a certain period and tries to ensure that the currency is within this framework.
Exchange rates of the Central Bank of the Russian Federation for a given date can be seen at any time on the website of the Central Bank of Russia.
Factors affecting the exchange rate of the Russian Federation
The ruble exchange rate is affected by a lot of factors. The main ones are listed below in descending order of degree of influence:
- National default, that is, failure or inability to repay debt to foreign creditors on time. In August 1998, Russia's refusal to pay external debt led to a 4-fold collapse of the ruble against the US dollar and other currencies in just a few days.
- Active long-term participation of the country in major armed conflicts, a sharp increase in defense spending.
- The cost of oil in the international market. Russia is one of the largest exporters of hydrogen sulfide to the world market. From 40% to 50% of the federal budget revenues are generated from the sale of Urals and other brands of oil to foreign buyers. An increase in the cost of a barrel of oil (158.978 liters) usually leads to a strengthening of the national currency. The currency of the Russian Federation is largely “oil currency”.
- Conducting very large quick exchange transactions for the sale of securities of companies with the participation of state capital.
- Foreign exchange intervention of the Central Bank of Russia. To maintain or weaken the ruble exchange rate, the Central Bank sells or buys the desired currency on the Moscow Exchange.
- Actions by non-state market participants to acquire or sell very large amounts of currency during a trading session.
- The introduction by the United States or the European Union of economic sanctions against key Russian individuals and legal entities. The currency of the Russian Federation is very clearly and quickly "feels" on its course.
- Inspirational speeches by a national leader. Usually lead to a slight strengthening of the ruble.
Also, the level of a negative or positive trade balance of a country has a significant impact on the exchange rate of any currency.
The national currency is the blood of the state’s economy. Its shortage or problems with its circulation and exchange will lead to disastrous consequences for the national economy. This is a fragile and delicate tool for managing the economy, which can significantly improve or completely destroy it.