/ world today news/ The Russian currency weakened against the dollar and the euro after a long strengthening. The reason is the aggravation of the geopolitical situation and the upcoming new sanctions, experts point out. How stable is this trend and at what levels will the ruble end the year?
Tolerates losses
Literally in a matter of days, the dollar jumped from 54 to 63 rubles, the euro – from 58 to 62. Recently, the approach of the tax period, restrictions on the foreign exchange market and even the risks of blocking the work of the National Clearing Center, without which transactions are impossible, added positively to the Russian currency on the Moscow Stock Exchange. It was also supported by expensive oil.
“At the end of September, in anticipation of sanctions against the NCC and a possible blocking of foreign currency on their accounts, many investors got rid of the dollar and the euro, which contributed to the strengthening of the ruble. And exporters sold currency profit to pay the mining tax on minerals”, says Olga Veretenikova, vice president of the analytical company “Borsel”.
Geopolitics and sanctions
Now the situation has changed: a sharp aggravation of the geopolitical situation has come to the fore. The explosion of the Crimean bridge, attacks on Ukrainian infrastructure are perceived by investors as an escalation of the conflict, and this negatively affects the ruble.
“Market participants are turning to defensive instruments, including foreign currency,” explains financial analyst, trader Artyom Zvezdin.
The ruble will continue to fall. But not too deep.
“Exporters who find it profitable to sell currency at a higher rate to pay taxes and service current activities in the country will help. The authorities may also re-tighten exchange controls to prevent the exchange rate from returning to levels from February,” Veretenikova said. In this case, the ruble will likely remain in the range of 65-70 per dollar.
On the other hand, the market has already reacted sharply to the preparation by the European Union of another package of economic sanctions. According to some analysts, the ruble will not have support in the middle of winter.
“Obviously, we will see a further decline. The average exchange rate until spring is 80-85 per dollar,” predicted Zvezdin.
Export of currency and due date after Eurobonds
Another factor is the attempts of investors and companies to withdraw funds abroad. The demand for currency among the population has also increased.
“Since the beginning of September, the Central Bank has increased the supply of cash at ATMs by about a trillion rubles. It is likely that most of this money was transferred to foreign currency. Market participants are also more actively transferring balances from dollars and euros to foreign banks,” explains Sergey Konigin, senior economist at investment bank “Sinara.”
In addition, payments on Eurobonds of sanctioned companies were made in rubles instead of the placement currency in October. As Konigin explains, this upsets the balance of bondholders who have to go public, closing a position in another currency. Issuers now have to transfer about $5.7 billion.
Search for yuan and trade balance
The Chinese yuan, which is becoming more and more interesting to investors, also had an impact.
“In the recent session on the Moscow Stock Exchange, the yuan/ruble traded higher than the dollar/ruble, and this weakened the Russian currency,” said Alexander Dzhioev, an analyst at Alfa Capital.
The beginning of buying friendly yuan in the reserves of the Bank of Russia under the budget rule will also play against the ruble.
According to investment bank Sinara, the billion-dollar purchase of yuan will shift the exchange rate by 1.2 percentage points. Analysts also point to a contraction of the trade balance in the event of a drop in oil demand and a halt in gas exports from the current ten to fifteen billion dollars per month to less than five billion, which will further weaken the ruble.
At the same time, as “Alfa Capital” emphasizes, the surplus on the current account will not allow the national currency to collapse.
“Rosbank” also pays attention to this. According to official data, the surplus for the third quarter was 51.9 billion dollars. Since the beginning of the year – already 198.4 billion. According to economists, the range of fluctuations of the ruble in the fourth quarter will be 60-63 per dollar.
Translation: V. Sergeev
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