According to the Moscow Stock Exchange, the dollar and euro exchange rates corrected slightly after the morning rise of the auction. As of 11:32 Moscow time, the cost of the dollar is 99.45 rubles and the cost of the euro is 104.4 rubles.
What is the reason for the increase in exchange rates?
“The ruble accelerated its weakening after the end of the tax period on September 28. The supply of foreign exchange in the market was kept high as exporters sold their foreign exchange earnings to meet the budget. By the last week of October, the ruble lost this support factor,” explained Sovcombank chief analyst Mikhail Vasiliev.
From an economic perspective, the weakening trend of the ruble continues in the last 10 months. Vasiliev explained that despite high oil prices, the current supply of foreign currency from exports is not enough to meet the demand for foreign exchange for import purchases, capital outflows and separation from foreign companies.
“Due to the transition to ruble in export and import payments, the flow of foreign currency income to the country decreased. The analyst also said Russian President Vladimir Putin at the Eastern Economic Forum said officials were seeing a “limited return of foreign exchange earnings” from top exporters.
Vasiliev believes that therefore the authorities will negotiate with business to increase the supply of foreign currency to stabilize the ruble exchange rate, but without “cool moves” in the field of currency control measures.
According to him, negative factors on the ruble exchange rate include geopolitical and budgetary risks, accelerating inflation and the ban on gasoline and diesel exports. It reduces foreign exchange earnings and foreign exchange supply. According to Vasiliev, the ban on the export of oil products is more negative than the positive effect of the introduction of export duties on the “exchange rate” for the ruble.
“According to our estimates, gasoline and diesel exports could reach $12 billion (or $4 billion per month) in the fourth quarter. “This figure is almost the same as the current account surplus that we estimated in October-December,” Vasiliev said.
He believes that this ban on the export of oil products could significantly reduce the already insufficient supply of foreign currency on the Russian market and put pressure on the ruble.
Mikhail Zeltser, candidate of economic sciences, stock exchange expert at BCS World of Investments, added that speculators play against the ruble exchange rate.
According to Vasiliev, it is necessary to stabilize the ruble exchange rate, including increasing the supply of foreign currency from exporters and reducing the demand for foreign currency for capital outflow.
“At the same time, finer manual adjustments are needed in the field of work with exporters on the return of foreign exchange earnings and exchange control in order not to hinder the operation of businesses under the current conditions of Western sanctions.” the analyst explained.
The monetary factor provides some support to the ruble.
“In an environment where annual inflation has accelerated above 5.8 percent, expectations for an increase in the key interest rate at the next meeting of the Bank of Russia on October 27 have increased by at least 1 point to 14 percent annually. “As a result, banks began to increase deposit rates more actively, which increased the attractiveness of ruble savings,” he said.
Vasiliev also stated that high oil prices, yuan sales of 0.8 billion rubles per day from reserves and new export taxes that came into force on October 1 also favor the ruble. According to the Ministry of Finance, Russian oil prices exceeded $83 per barrel in September, compared to $50-60 in the first half of the year. According to the analyst, “exchange rate” export taxes could increase the supply of foreign currency on the market by about $0.7 billion per month.
What will happen to the ruble exchange rate in October?
According to Vasiliev, the weakening trend of the ruble may continue in October until new administrative measures are taken to support the exchange rate. Vasiliev suggested that in October the dollar would cost 97-102 rubles, the euro 102-107 rubles, and the yuan 13.3-13.9 rubles.
According to Zeltser, the basic and exchange rates of the ruble can differ significantly, and high volatility in the exchange rate does not exclude strong movements, and this was observed in August, when the dollar returned from 102 rubles to 92 rubles. Therefore, Zeltser does not rule out another reversal in the 100-ruble area and a recovery of the ruble in the autumn close to 90 rubles per dollar and 95 rubles per euro.
In the base scenario, Vasiliev expects Russian authorities to step up verbal interventions to support the ruble in the coming days.
In the event of an even sharper weakening of the ruble and the dollar exceeding the 100-ruble limit, Vasiliev expects the authorities to implement additional measures previously announced: return of the mandatory sale of foreign currency earnings of exporters, tightening restrictions on capital outflow and dividends and loans abroad, including the amount in rubles ban on payments. In addition, Vasiliev listed possible measures: a ban on lending to foreign trading units, an additional increase in the key interest rate to 15-17%, an increase in the sale of yuan from reserves, a ban on Russian companies buying back their shares from non-residents, and a slowdown in the exit of foreign companies from the Russian market. .
Until a consensus is reached between the Ministry of Finance and the Bank of Russia on foreign exchange control and the sale of export proceeds, the ruble exchange rate will be quite volatile and may well exceed 100-105 rubles per dollar in the near future. . says Candidate of Economic Sciences, Director of the Federal Center for Financial Literacy Methodology, Associate Professor of the Department of Global Financial Markets and Fintech at the Russian University of Economics. GV Plekhanova Denis Perepelitsa.
“Raising the interest rate will most likely have almost no effect on stabilizing the exchange rate. Previous approaches to supporting exporters and endless devaluation of the ruble are already outdated and require revision. “A thoughtful and consistent policy is needed to develop the domestic market while ensuring the stability of the ruble,” he said.
Vasiliev assumes that in the basic scenario, the ruble exchange rate will remain in the range of 90-100 rubles per dollar until the end of the year. In his predictions for the fourth quarter, Vasiliev predicts that the average exchange rate of the dollar will be 98 rubles, the euro will be 103 rubles and the yuan will be 13.4 rubles.
“We include the average ruble-dollar exchange rate of 100 rubles in our 2024 forecasts. At the same time, risks are shifting towards a weaker ruble exchange rate,” Vasiliev emphasized.