“It’s hardly worth abandoning the “toxic” dollars and euros in favor of the yuan.”
A lot of economic rumors have already arisen around the presidential elections. There is a popular opinion on social networks that after March 18, “the ruble will be left to its own devices,” and the level of 100 rubles per dollar will be broken again. The decision of the Central Bank of the Russian Federation on the key rate on March 22 will also have an impact on the national currency. MK discussed how the events of the first month of spring will affect the ruble with the head of the analytical department of the BKF bank, Maxim Osadchiy.
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— In 2023, the ruble devalued against the dollar by “only” 21.6%, which is undoubtedly a very good result compared to the Turkish lira, which devalued by 36.6%, or the Nigerian naira, which fell by 50.1%.
— At the end of 2023, the ruble exchange rate took a defensive position at a relatively safe distance from the psychologically significant level of 100 rubles per dollar. So, on December 30, 89.7 rubles were given per unit of American currency. In January, the ruble even tried to go on the offensive, strengthening on January 16 to 87.7 rubles per dollar, but retreated under the blows of sanctions to “pre-prepared positions.” In anticipation of the American and European restrictions introduced on February 23-24, the ruble on the Moscow Exchange with “today” settlements even broke through the level of 100 rubles per dollar on February 22, but immediately bounced back, because the panic was clearly premature — the sanctions turned out to be quite toothless » The main threat that most frightened the market—bans against the Moscow Exchange and against the National Clearing Center (NCC)—turned out to be unrealized.
— Of course, the effectiveness of sanctions should not be underestimated. They, like boas, strangle their prey slowly but surely, tightening the victim’s body with rings of numerous “packages”. In general, sanctions undoubtedly influence the weakening of the ruble, but over relatively short periods of time they can also have the opposite effect on the domestic currency, since they contribute to a decrease in both exports and imports. Sanctions also lead to a weakening of capital outflow from Russia, which helps to strengthen the ruble.
— You can’t argue with the regulator. Russian net exports decreased almost threefold: from $315.6 billion in 2022 to $118.3 billion in 2023. At the same time, exports decreased and imports increased; this “scissors” effect reduced the influx of foreign currency into the Russian economy and contributed to the weakening of the ruble. Exports of Russian goods fell due to sanctions restrictions and low demand on the international market amid slowing global economic growth. And imports grew, first of all, thanks to the “turn to the East” and the expansion of “parallel imports”.
— An important problem is the structural restructuring of the Russian foreign exchange market. Firstly, it was divided into “isolated compartments” for individual currency pairs, which has never happened before. Converting large volumes of one currency into another has become difficult. Secondly, these isolated segments of the foreign exchange market have become “shallow”: liquidity often becomes critically low, which is manifested in “breakouts”, when powerful exchange rate fluctuations occur with relatively small volumes of transactions, as happened, for example, on February 22. The effect of a decrease in the liquidity of the foreign exchange market can be more clearly observed in the currency swap market (the so-called temporary exchange of assets during trading on the stock exchange — “MK”), the quotes of which reflect the often severe shortage of dollars and euros. In particular, market participants are often willing to borrow euros at double-digit, prohibitively high rates.
— The ruble is affected by multidirectional factors. I will list the main ones. First, the ongoing conflict between Israel and the Palestinians, intensified by the Houthis' support for the Palestinians, is driving up the price of oil and thereby contributing to the strengthening of the ruble. Secondly, the budget deficit will most likely be largely financed by the “printing press”, which will contribute to the weakening of the ruble. In 2023, the budget deficit amounted to 3.2 trillion rubles against the plan of 2.9 trillion rubles. In 2024, the budget deficit is planned at 1.6 trillion rubles. In 2022, the M2 money supply grew by 24.4%, in 2023 — by 19.4%. Active growth of the money supply is a factor in the weakening of the ruble. At the same time, the strict monetary policy of the Central Bank and, first of all, the high level of the key rate contribute to the strengthening of the ruble.
It is clear that with such a combination of multidirectional factors, it is possible to reliably predict the dynamics of the ruble, especially in the turbulent conditions of the geopolitical conflict is not possible.
— The most likely option for now seems to be a moderate weakening of the ruble, but shocks will undoubtedly come. Strong shocks, primarily sanctions, can collapse the ruble, as has happened more than once. Moreover, the “immunity” of the ruble to such shocks has weakened due to a decrease in the liquidity of the Russian foreign exchange market.
— It is highly likely that the regulator will leave the rate unchanged. Accordingly, the impact of this decision on the ruble can be neglected.
— The extension of the presidential decree on the sale of foreign currency earnings will be neutral for the ruble exchange rate. The cancellation of this measure will contribute to the weakening of the ruble. But I am inclined to believe that this measure will be extended for reasons of maintaining stability.
— Take into account existing currency risks and diversify the currency basket. It is hardly worth giving up “toxic” currencies, that is, dollars and euros, and it is hardly worth buying yuan. It should also be remembered that it is unwise to open deposits in foreign currency (both “toxic” and “non-toxic”) in Russian banks as long as restrictions on foreign currency deposits are in effect.