A déjà vu moment played out on a recent Tuesday, with the rouble teetering just below the 100-mark against the U.S. dollar—a critical benchmark for Russia’s currency. Although the rouble managed a modest comeback, this embarrassing stumble highlighted its shaky footing and raised concerns of further depreciation.

The rouble’s value has taken a beating this year, shedding almost 30% of its worth against the greenback since January.

A number of things may have influenced the drop in exchange rates—from foreign currency outflows and declining trade activity to Russia’s waning current account surplus.

But some factors may still be working to Russia’s advantage, such as its budget.

The falling value of the rouble means more of the Russian currency for every dollar earned through the trade of oil or other products. This, in turn, has given the Kremlin more money to pour into the military or social schemes, for instance, to help offset the impact of sanctions.

Despite the seeming upside of a weak ruble and the Kremlin’s swift actions to stem any negative effects from it, the Russian currency’s value is not out of the woods yet.

The August slump

When the rouble weakened to more than 100 to the U.S. dollar in August, the Bank of Russia called an “extraordinary meeting”, subsequently hiking interest rates by 350 basis points to 12%. The bank also said it would halt foreign currency purchases on the domestic market until the end of the year in an effort to stabilize its financial markets.

Russia’s state media and senior officials were also rattled by the rouble’s tumble into three-digit territory. Vladimir Solovyov, a popular TV person in Russia and President Vladimir Putin’s ally, said the country had become a laughing stock, pointing to how dire the situation had gotten.

Putin’s economic advisor, Maxim Oreshkin, told state-owned news outlet TASS that “loose monetary policy” was causing the drop in the rouble’s exchange rate and exacerbating inflation.

“A weak ruble complicates the structural restructuring of the economy and negatively affects the real incomes of the population. A strong ruble is in the interests of the Russian economy,” Oreshkin said according to the translation of an August op-ed in TASS.

In September, the central bank once against raised rates to 13% to tackle the falling rouble value and stubborn inflation, which was at 5.33% at the time. Further rate hikes are expected in the next central bank meeting later this month.

The rouble has wavered a lot since 2022—shortly after Russia’s invasion of Ukraine it hit an all-time low of 120 roubles to the U.S. dollar, but by last June, the currency had recovered to nearly 50 roubles to the dollar when oil and gas prices soared.

“This level (100) is not a technical resistance, it’s an important psychological barrier,” said Russian investment group Alor Broker’s Alexei Antonov told Reuters. “For now, everything speaks in favour of the rouble continuing to get cheaper.”

The rouble’s current weakness could be temporary, but the Russian government faces pressures on its finances and more prolonged effects of a weaker currency. Plunging export volumes continue to weigh on the economy, as the current account surplus shrank 86% year-on-year to just $25.6 billion in January-August. Elevated consumer prices along with a depreciated rouble make it harder for the average Russian to afford basic goods.

As Moscow struggles to keep its currency strong while navigating other macroeconomic challenges, experts suggest that a drop in the rouble’s exchange rate is not quite an economic crisis, although it does ring alarm bells for the government.

“This is the closest we came to a real economic problem since the start of the war,” Janis Kluge, an expert in the Russian economy at the German Institute for International and Security Affairs told the Associated Press in August following the rouble’s drop to a 16-month low. “In Russia, the exchange rate is always seen as the most important indicator of the health of the economy.”