On the eve of November 28, when the tax period ended in Russia, the ruble exchange rate began to fall against the dollar and the euro. At the close on November 27, the price of the American currency increased by 20 kopecks to 88.81 rubles, and the euro increased by 21 kopecks to 97.28 rubles. During the week, the ruble exchange rate attempted to strengthen, but towards Friday a weakening trend prevailed. According to the Moscow Stock Exchange, at 15:10 Moscow time, the American currency is trading at 90.0341 rubles and the European currency is trading at 98.479 rubles.
Sovcombank chief analyst Mikhail Vasiliev suggested that the dollar will gain value in December 87–92 ruble and euro – 95–100 ruble BCS Forex analyst predicted the US currency as follows: 90-91 ruble and euro – according 98-99 ruble in the last month of the year. In December, dollar and euro exchange rates will fluctuate around their levels 90 And 98 accepted the ruble, candidate of economic sciences, associate professor at the department of world financial markets and fintech of the Russian University of Economics, respectively. GV Plekhanova Denis Perepelitsa.
Will the ruble strengthen?
According to Vasilyev, the main support for the ruble exchange rate in December will continue to be provided by the presidential decree on the compulsory sale of foreign currency earnings to the largest exporters.
“The Russian currency is favored by strong exports due to still-high oil prices and high ruble interest rates, with imports declining,” the analyst commented.
He explained that the increase in the key interest rate by 200 basis points to 15% per annum on October 27 led to an increase in the cost of credit and a decrease in consumer and investment demand, including demand for imports as well as foreign currency. The analyst said that the increase in deposit rates increases the attractiveness of ruble savings and increases the demand for the ruble. According to the Central Bank, the average maximum deposit rate of the ten Russian banks attracting the largest volume of deposits in rubles rose to 13.64% annually in the second ten days of November.
According to Vasiliev’s predictions, the Bank of Russia will increase the interest rate by another 100 basis points to 16% at its next meeting on December 15. The analyst also allowed the key interest rate to rise to 17% if weekly inflation data showed price growth accelerating towards 8% by the end of the year.
“Further tightening of the key interest rate policy will also be positive for the ruble in the medium term, over weeks and months. Following the increase in the key interest rate, deposit and loan interest rates will also increase by a similar amount. But you should not expect the ruble exchange rate to react instantly to the results of the Central Bank meeting,” Vasiliev said.
According to him, in general, the impact of the key interest rate on the Russian currency has become longer and more indirect due to the absence of foreigners, Western sanctions and restrictions on capital movements.
BitRiver’s economist and communications director Andrei Loboda did not rule out the possibility that the ruble exchange rate would strengthen following the Central Bank’s decision. He believes that if the regulator increases the interest rate, the dollar exchange rate may fall to 86 rubles and the euro to 96 rubles. According to Perepelitsa, the price of the American currency may drop to 88 rubles, and the price of the European currency may drop to 96 rubles.
“Currently the financial market will most likely be guided by the Central Bank’s forecasts and possibly the exchange rates of the dollar and euro to other currencies,” Loboda admitted.
What will play against the ruble?
Vasiliev said that December generally has a negative seasonality in terms of the ruble exchange rate.
“Expectations that inflation will accelerate further to 7.5-8% by the end of the year and expectations of an increase in budget expenditures in December, which will lead to an increase in the ruble, may oppose the ruble. It can be used to purchase supplies and imports. In addition, citizens and companies continue to withdraw money from Russia, and capital outflows may intensify towards the end of the year. The analyst noted that at the end of the year, many business owners and managers paid dividends and bonuses, which were mostly converted into foreign currency and transferred abroad.
Additionally, the expert suggested that at the end of the year, some investors may intensify their foreign exchange purchases to survive the long New Year holidays. But he concluded that the factor of forced sale of foreign exchange earnings and the decrease in imports may outweigh and the ruble may not weaken.
When to buy currency?
The fact that some Russians go on holiday abroad for the New Year’s holiday will also increase the demand for foreign currency in December.
According to Vasiliev, it is better to divide the purchase of foreign currency for the New Year holiday into several parts at the beginning, middle and end of December in order to reduce the risk of buying dollars and euros at a negative rate.
According to Trifonov, it is preferable to buy foreign currency at this time, but in general, serious volatility in the exchange rate is not expected, and the cost of buying foreign currency right before going abroad is unlikely to be high.
“If a person wants to buy dollars and euros in the morning, he needs to find the rates of different banks on websites and mobile applications in order to compare and find the most suitable rate for foreign currency sales. With currencies rising strongly this year and holidays abroad becoming very expensive, you should not expect an increase in demand for dollars and euros and holidays abroad this winter. Flight tickets are not cheap either,” Loboda said.
According to the economist, as the New Year approaches, the price of the ruble should increase, while the price of the foreign currency should decrease due to the tax period and the high demand of Russians for the national currency. Loboda explained that the demand for rubles will be associated with the desire to buy gifts for the holiday and have time to open a deposit at a favorable interest rate before the New Year holidays.