On June 13, the Moscow Exchange halted trading in dollars and euros due to US sanctions, making the determination of the ruble exchange rate for settlements with Western counterparties a creative endeavor.
In the insight “Arbitration Labyrinth: The Sanctions Quest for Russian Companies in the European Financial System.” we discussed the challenges faced by Russian lawyers when interacting with American and European colleagues, and explored potential solutions.
Today, our colleagues from S Family helped prepare methods for calculating the ruble exchange rate itself.
Traditional Methods
Moscow Exchange
does not directly determine the ruble exchange rate, as it has been placed on the SDN list.
Central Bank of the Russian Federation
Applies the following calculation methodology:
- Financial organizations are required to submit reports on completed transactions to the regulator no later than 3:30 PM Moscow time on each trading day.
- The Central Bank has the right to exclude transactions made at extremely low or extremely high prices from the calculation formula to minimize their impact on the average indicator.
- Adjustments are also made for transaction volumes: larger transactions carry more weight in calculating the official exchange rate.
- Additional restrictions apply, for example, if a single credit institution accounts for 75% of currency supply, its operations may be excluded from consideration.
Interbank Market
With several peculiarities:
- Participants can agree to adjust the exchange rate to expedite a transaction, depending on the partner's interests.
- Information on trading volumes and the number of participants is not disclosed.
- The interbank market offers a dynamic exchange rate that is difficult to use for forecasting the official Central Bank rate due to its complex calculation formula.
- Intraday fluctuations in the interbank market rate can be substantial, reaching up to five rubles per dollar.
Financial Converters
Yahoo Finance for iOS devices, Google Finance for Google and Android devices, and XE for all others. Popular converters currently provide rates close to the Central Bank's, with fluctuations within
Market Methods
Cross-rate via Yuan.
Calculating is quite simple, if both pairs are known.
For example, if on MOEX CNY/RUB=11.77 and CNY/USD=0.14, then USD/RUB would be 12.84/0.14=84.04
Similarly, the ruble's rate can be calculated using other currencies traded on MOEX.
Cryptocurrency
Stablecoins pegged 1:1 to the dollar, most often USDT, are typically used for rate calculation.
The rate is determined by exchange aggregators and P2P transactions. While rates in exchangers and P2P usually don't differ significantly, P2P rates can sometimes be lower. For instance, 93.36 in exchangers versus 93.2 on P2P transactions.
The cryptocurrency market is extremely volatile, and exchange rate fluctuations can be significant throughout the day.
"Fair Methods"
Multiplying the average market exchange rate of a base year by the ratio of inflation rates in the two countries
For example, if prices in Russia doubled over a certain period while increasing by a quarter in the US, then the exchange rate should rise by a specific percentage.
Alfa Bank analysts performed this exercise in early 2024, assuming the ruble was allowed to float freely in December 2014.
Shortly thereafter, a panic-high exchange rate of around 80 rubles was established. Six months later, the dollar retreated to 50 rubles and then fluctuated significantly throughout 2016. The market only calmed down by early 2017, after which the dollar stabilized for a long period.
The average exchange rate for 2015–2016 was 64 rubles. This can be taken as the baseline. Slightly less than nine years have passed since then. Ruble inflation during this period should have added 79% to the dollar's value. Dollar inflation should have slowed this growth by 31%. Their ratio gives +37% compared to the base year, meaning the fair exchange rate now = 87 rubles per dollar.
Using the "Big Mac Index"
This method of comparing the real value of currencies by purchasing power parity (PPP) is calculated by the British magazine "The Economist" and Statista.
For example, if the price of a "Russian" Big Hit is approximately 186 rubles, and a Big Mac in the US costs 5.69 dollars, then the fair exchange rate of the Russian ruble to the US dollar would be 186/5.69=32.68.
Instead of conclusions
Market participants and economic analysts face a high degree of uncertainty, which necessitates deeper analysis and a cautious approach to currency exchange rate assessment under current conditions.
Ultimately, everyone now determines for themselves the rate at which they are willing to exchange rubles for dollars. Some are waiting for 32, while others are waiting for 200.