On 13 June, the Moscow Exchange stopped trading dollars and euros as a result of US sanctions, and determining the rouble exchange rate for settlements with Western counterparties became a creative exercise.

In our insight "The arbitration labyrinth: the sanctions quest of Russian companies in the European financial system", we described the problems Russian lawyers face when dealing with American and European colleagues and looked for solutions.

Today our colleagues from C Family helped us prepare methods for calculating the rouble rate itself.

Traditional methods

The Moscow Exchange

It no longer sets the rouble rate directly, as it has been placed on the SDN list.

The Central Bank of Russia

It uses the following calculation method:

1. Financial institutions must report their transactions to the regulator by 15:30 Moscow time each trading day.
2. The Central Bank may exclude transactions made at extremely low or extremely high prices from the calculation to minimise their effect on the average.
3. An adjustment for transaction volumes is also applied: larger transactions carry more weight in calculating the official rate.
4. Additional restrictions apply — for example, if one credit institution accounts for 75% of currency supply, its transactions may be excluded.

The interbank market

With a number of specifics:

1. Participants can agree to change the rate to speed up a transaction depending on the partner's interests.
2. Information on trading volumes and the number of participants is not disclosed.
3. The interbank market provides a dynamic rate that is hard to use to forecast the Central Bank's official rate because of the complex calculation formula.
4. Intraday rate fluctuations on the interbank market can be significant — up to five roubles per dollar.

Financial converters

Yahoo Finance for iOS devices, Google Finance for Google and Android devices, XE for everything else. Popular converters currently give a rate close to the Central Bank's, with small fluctuations.

Market methods

A cross rate via the yuan.

It is quite simple to calculate if both pairs are known.

For example, if CNY/RUB = 11.77 on MOEX and CNY/USD = 0.14, then USD/RUB will be 12.84/0.14 = 84.04.

The rouble can be calculated in a similar way through other currencies traded on MOEX.

Cryptocurrency

Stablecoins pegged 1:1 to the dollar, most often USDT, are usually used to calculate the rate.

The rate is determined on exchange aggregators and in P2P transactions. Rates at exchangers and in P2P usually differ only slightly, though P2P may be lower — for example, 93.36 at exchangers and 93.2 in P2P transactions.

The cryptocurrency market is extremely volatile, and rates can fluctuate significantly within a day.

"Fair" methods

Multiplying the average market rate of a base year by the ratio of inflation in the two countries.

For example, if over a certain period prices in Russia doubled while those in the USA rose by a quarter, the rate should rise by a certain percentage.

Alfa-Bank analysts did this exercise at the beginning of 2024, taking as their starting point that the rouble was allowed to float freely in December 2014.

Soon afterwards, a panic-driven rate of around 80 roubles was established. Six months later the dollar fell back to 50 roubles and continued to fluctuate strongly throughout 2016. The market only calmed down by early 2017, after which the dollar stabilised for a long time.

The average rate for 2015–2016 was 64 roubles, which can be taken as the starting point. A little under nine years have passed since then. Rouble inflation over this period should have added 79% to the dollar, while dollar inflation should have slowed this growth by 31%. Their ratio gives +37% over the base year, meaning that the fair rate now is 87 roubles to the dollar.

Using the "Big Mac index".

This way of comparing the real value of currencies by purchasing power parity (PPP) is calculated by the British magazine The Economist and by Statista.

For example, if the "Russian" Big Hit costs about 186 roubles and a Big Mac costs USD 5.69 in the USA, the fair rate of the rouble to the US dollar would be 186/5.69 = 32.68.

In lieu of conclusions

Market participants and economic analysts face a high degree of uncertainty, which calls for deeper analysis and a cautious approach to assessing the exchange rate in current conditions.

In the end, everyone now decides for themselves the rate at which they are prepared to exchange roubles for dollars. Some are waiting for 32, others for 200.