The US dollar has declined more than 1% over the past two days, with USD/RUB trading near 82.75 on over-the-counter markets as of late October 2025.
Why the Ruble is Strengthening Again
Market sentiment shift on interest rates: Market participants have reassessed their outlook following the Central Bank of Russia’s decision on September 12. Previously, markets were more optimistic about further rate cuts. The CBR signaled that rate reductions have largely concluded, with no sharp declines expected ahead. This outlook was reinforced by news that the VAT rate will increase by 2 percentage points starting next year.
Tax period demand: The current tax payment deadline for mineral extraction tax (NDPI) is driving strong demand for rubles, supporting the currency.
Broad dollar weakness: The US dollar is declining across major exchanges. August was particularly weak for the dollar, with a 2.2% decline following July gains and a poor June. While this supports ruble strength, it is a secondary factor compared to domestic Russian conditions.
Inflation and Energy Markets
Weekly inflation from September 16–22 reached 0.08%. On an annualized basis, official price growth fell below 8%. However, fuel remains problematic, with annual gasoline price increases at 12.03%. Energy Minister Alexander Novak announced that the fuel export ban has been extended through the end of the year, citing strikes on Russian refineries and seasonal demand increases as the primary drivers of fuel price growth.
Russian Stock Market
The Moscow Exchange Index is consolidating around the 2,730-point level. The positive signal is that the index has held above the 2,700-point support level, though no decisive direction has emerged yet.
Sector performance: Power generation and chemicals sectors posted solid gains during the week. Phosagro provided significant support to the chemicals index, with the company’s registry closing on October 1 and a dividend decision of 273 rubles per share approved on September 12, yielding approximately 3.7% at current prices. Metals and mining underperformed with a 3.4% decline, while real estate sector stocks fell 2.3%.
Oil and gas stocks rose nearly 1%, potentially supported by improving crude oil market conditions. Brent crude attempted to break above $70 per barrel on Friday but reversed lower on Thursday ahead of the OPEC+ meeting scheduled for October 5.
FAQ
Why did the ruble strengthen in October 2025?
The ruble strengthened due to three main factors: market reassessment of interest rate expectations following the Central Bank’s September decision, strong demand for rubles during the tax payment period (NDPI deadline), and broad weakness in the US dollar across global markets.
What was the impact of VAT changes on the ruble?
News that the VAT rate would increase by 2 percentage points starting in 2026 contributed to negative market sentiment regarding future economic conditions, reinforcing the shift away from expectations of further rate cuts and supporting ruble demand.
How did Russian stock sectors perform during this period?
Power generation and chemicals sectors gained, with Phosagro providing strong support to chemicals. Metals and mining fell 3.4%, real estate declined 2.3%, and oil and gas rose nearly 1% amid improving crude oil market conditions.
