In January-April 2024, the ruble exchange rate will be strong due to the seasonal decrease in demand for the dollar and euro and the forced sale of foreign exchange earnings Valid until April 30 for the largest exporters. Vasiliev gave this prediction to socialbites.ca.
“Since the beginning of the year, on the morning of January 11, the ruble has strengthened by 2 percent against major currencies. In the coming months, energy prices are likely to remain close to current (fairly high) levels due to the winter heating season. The beginning of the year usually experiences low business activity due to the long New Year holidays. Importers receive less money, the population receives less money for foreign tourist trips, and the state receives less money for foreign debt payments. Additionally, budget expenditures at the beginning of the year may also decrease. All this will support the ruble,” explained the analyst.
Another factor in favor of the Russian currency is the sale of yuan from reserves within the scope of budget operations. According to Vasiliev, the Bank of Russia will sell 7-9 billion rubles a day in yuan in the coming months (compared to 0.8 billion rubles in December).
Finally, high ruble interest rates facilitated the strengthening of the local currency after the interest rate was raised to 16% in December. Banks and brokers record the flow of funds to ruble deposits and ruble bonds at 14-18% per year. When the demand for the ruble increases, the exchange rate rises.
The “bottom” of the dollar and euro
Vasiliev admitted that in the first quarter the dollar exchange rate could drop to a maximum of 85 rubles and the euro to 93 rubles. On average, in January-March the dollar will cost 87 rubles and the euro 96 rubles.
Doctor of Economic Sciences, Professor of the Department of State and Municipal Administration of the Financial University of the Government of the Russian Federation Yuri Shedko is confident that the trend towards the strengthening of the ruble exchange rate against the dollar and euro will continue until mid-2024. He also described the level of 85 rubles for the dollar and 93 rubles for the euro as the “bottom”.
“According to technical analysis, the limit for strengthening the ruble exchange rate is 83.5 rubles per dollar and 92.5 rubles per euro.
Currency speculators may further strengthen the ruble – the dollar may fall below 83.5 rubles,” 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.
Risks for the ruble
According to Vasiliev, the period from May to the end of the year is generally less favorable for the ruble exchange rate due to seasonal factors:
“The compulsory sale of foreign exchange earnings after April 30 may be cancelled. The demand for foreign currency, including tourist trips, has been increasing since May. Therefore, in the middle of the year, one dollar can cost 95 rubles and one euro can cost 105 rubles.”
Limiting factors for the national currency may also include geopolitical and sanctions risks, soft budget policy, high inflation and the possible removal of mandatory sales of foreign exchange earnings.
“The second half of the year is generally less positive in terms of commodity prices. This year, we expect a slowdown in the global economy due to high interest rates in the USA and Europe, as well as geopolitical tensions. We include in our forecasts that Brent oil prices will drop from 82 dollars per barrel at the beginning of 2024 to 75 dollars per barrel at the end of the year. We expect the interest rate reduction cycle to start in the second half of the year, with a target of 12% by the end of the year. “The decrease in ruble interest rates will reduce the support for the ruble,” Vasiliev explained.
Do you need currency?
Vasiliev considers it reasonable to keep part of his savings in foreign currency assets to insure against the weakening of the ruble exchange rate. According to that,
Now you can consider exchanging bonds of large Russian companies, which yield 6-9% per year, for dollars and euros, and invest some of your savings in yuan and gold.
Perepelitsa recommends purchasing dollars and euros when they reach their minimum level and only for foreign travel.
“There is no point in opening deposits in these currencies, because the income from them is minimal and the risk of account blocking as a result of sanctions is quite high. “The state is not responsible for banks’ liabilities regarding foreign currency deposits,” the economist said.
BCS Forex analyst Anatoly Trifonov added that foreign currency savings should be limited to the required volume in order to diversify risks in case of sharp shocks in the exchange rate.