The Russian economy is facing a downturn for the first time since sanctions were imposed. Key economic measures, like the manufacturing and services PMIs, have fallen below 50, indicating contraction. The International Monetary Fund has cut its GDP growth forecast to under 1% for next year. Meanwhile, revenues from oil and gas are decreasing, which is worsening the fiscal deficit. The Central Bank of Russia is lowering interest rates, which may weaken the exchange rate. It’s expected that the USD/RUB and EUR/RUB exchange rates will continue to rise steadily. This situation carries risks and should be handled carefully. It’s important to do thorough research before making any investment decisions. No guarantees are made about the accuracy or timing of the information provided. Users bear all risks, losses, and costs associated with investing. The views expressed here are those of the author and do not represent any official position. Current economic indicators suggest that the Russian ruble will weaken in the upcoming weeks. Recent S&P Global data shows that for July 2025, manufacturing and services PMIs fell to 48.2 and 47.9, respectively. This marks the first ongoing contraction since sanctions were initially imposed in 2022. The pressure on the ruble is rising due to decreasing energy revenues. This is crucial for the Russian budget. The Ministry of Finance reported a 22% year-over-year drop in oil and gas earnings for the first seven months of 2025. This decline is expanding the fiscal deficit and pushing the government to allow a weaker ruble to enhance the local value of its exports. The Central Bank of Russia’s recent decision supports this trend. Its 50-basis-point rate cut on July 28, 2025, bringing the rate down to 7.0%, shows a shift toward fostering economic growth instead of defending the currency. For traders in derivatives, lower interest rates make it less appealing to hold long positions in the ruble because of a smaller yield spread. We’re now in a different situation compared to 2023 and early 2024 when capital controls and high energy prices artificially boosted the ruble. During that time, betting against the currency was challenging. Current economic data indicates that these supports are diminishing, making a bearish outlook on the ruble more reasonable. In light of this, we recommend traders consider long positions in USD/RUB or EUR/RUB currency pairs using derivatives such as forwards or call options. With the USD/RUB rate now exceeding 95, aiming for the 98-100 range by late Q3 2025 seems realistic. Using options can help manage risk by limiting the maximum potential loss on the trade.

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