Since January this year, the ruble has lost 40 percent against the dollar and 41 percent against the euro. So far the Russian currency has not found a balance. At 13:40 Moscow time, the dollar consolidated at 97.55 rubles, up 0.68% since morning, according to the Moscow Stock Exchange. The euro costs 104,865 rubles (plus 0.1875%).
According to the forecasts of Sovcombank chief analyst Mikhail Vasiliev, in September the dollar will cost 94-99 rubles on the stock market, and the euro will cost 102-108 rubles. Other experts made similar assessments. Alexander Bakhtin, investment strategist at BCS Mir Investments, expects 95 rubles per dollar and 100 rubles per euro. According to him, signs of 100 rubles per dollar are not ignored, and the level of 97.5 rubles is the last technical obstacle to moving towards the psychological mark.
“From an economic point of view, the weakening trend of the ruble continues for the last nine months. However, the authorities probably plan to keep the exchange rate at 90-100 rubles per dollar in the coming months. The current supply of foreign exchange from exports is not enough to meet the growing demand for imports, foreign holidays for Russians, as well as increased demand due to geopolitical, budgetary and inflationary risks,” Vasiliev explained.
According to him, the supply of foreign currency in the domestic market decreased, both as a significant part of export payments were transferred to the ruble and friendly currencies, and because Russian companies kept some of their foreign exchange earnings inside. foreign accounts Exporters do this, among other things, because of the increased costs of carrying the currency. Bakhtin added that foreign currency inflows into the country are limited due to sanctions, difficulties in repaying foreign currency gains in Indian rupees, and Russia’s voluntary reduction of oil production.
What factors will support the ruble exchange rate?
Sovcombank’s chief analyst believes that the Central Bank of the Russian Federation’s key rate hike by 350 basis points to 12% per year will calm consumer and investment demand, including the dollar and the euro. He admitted that the Central Bank will raise the interest rate to 14-15 percent annually at the next Board meeting on September 15.
An increase in deposit rates and bond yields following the key interest rate will increase the attractiveness of ruble savings and increase the demand for the national currency. However, Vasiliev noted that several months are needed for this factor to be fully implemented in the economy.
According to him, the ruble may receive support from oil prices from autumn. According to the Central Bank, the approximate difference between high oil prices and the supply of foreign currency from export revenues to the Russian market is two to three months. The expert believes that the oil prices of the North Sea brand Brent were fixed above $ 80 per barrel in July, so a positive effect on the ruble is likely in September-October.
According to his estimates, it is possible for Brent oil to reach $90 per barrel in September, and Russian brand Ural oil to $75 per barrel. With a weak ruble, the increase in the cost of fuel increases the income of Russian oil companies and the federal budget of the Russian Federation. This is positive for the ruble exchange rate. According to preliminary estimates, the volume of additional oil and gas budget revenues in September will amount to 279.12 billion rubles.
There is also the sale of the yuan for 2.3 billion rubles per day by the Central Bank in favor of the national currency. Sovcombank’s chief analyst believes that if necessary, the regulator can increase the sale of Chinese currency from reserves to support the ruble.
Authorities have so far resorted to other administrative measures to stabilize the ruble; informal agreements with exporters to increase the sale of foreign exchange earnings. According to media reports, authorities have instructed exporters to maximize the flow of foreign currency earnings into their accounts with Russian banks and increase their foreign exchange sales. From August 21, exporters will be required to report weekly to the relevant departments on the volume and sales of foreign exchange earnings repatriated.
Will the ruble strengthen to 85 rubles per dollar?
According to Vasiliev, the weakening trend of the ruble can be reversed when equilibrium is established in the foreign exchange market and the foreign exchange supply from exports will be sufficient for imports and capital outflows. Meanwhile, the weakening of the national currency is likely to be restrained by administrative means. Then the ruble will already receive support in terms of economy. Vasiliev expects a decrease in imports, a decrease in capital outflows, and an increase in foreign exchange supply from exports.
Still, Sovcombank’s expert does not predict that the ruble will strengthen to 85 rubles per dollar. According to the bank’s basic scenario, it is unlikely that the Russian currency will strengthen below 90 rubles per dollar in 2023.
“The strengthening of the ruble below 90 per dollar is possible if the authorities use all support measures: exporters return the forced sale of foreign currency earnings, tighten control over capital movement and significantly increase the key rate.” Vasiliev suggested.
Analyst Daniil Bolotskikh acknowledged that such a drastic strengthening of the ruble is not unlikely if urgent measures are taken to tighten currency control, but in September such moves by the authorities are unlikely. Anton Prokudin, chief macroeconomist of Ingosstrakh-Investments Management Company, added that in order to raise the exchange rate to 85 rubles per dollar, a significant improvement in the prices of export goods is needed, but we did not observe this.
“A drop of up to 100 rubles per dollar seems more likely as there is a currency shortage.
For this reason, the Ministry of Finance and the Central Bank of Russia again entered into discussions on tightening foreign exchange controls. Bolotskikh stated that the Ministry of Finance is in favor of tightening, while the Central Bank has taken a more liberal position and is in favor of targeted adjustments.