Economist Krichevsky: “My forecast for December is over 100 per dollar”
Since the beginning of 2024, the ruble has demonstrated amazing stability. For the past four months, the exchange rate has fluctuated in a very small range of 89-93 rubles per dollar and 98-102 rubles per euro. Neither the presidential elections, nor drone strikes on oil plants, nor the aggravation in the Middle East, nor the terrorist attack in Crocus could “rock” the ruble in one direction or another… How long will the stability of the exchange rate be maintained? What factors will influence it and in what direction? How much will the ruble be worth by the end of 2024? MK addressed these questions to the experts: BitRiver financial analyst Vladislav Antonov, Capital Skills Financial Academy analyst Mark Goikhman, financial expert, author of the Economism project Alexey Krichevsky, Freedom Finance Global leading analyst Natalya Milchakova.
“Since the beginning of the year, the dollar has been fluctuating in a narrow range of 90-94 rubles. On the one hand, there is the influence of objective economic factors, for example, Russia’s strong macroeconomic indicators at the end of 2023, but there is also the influence of the factor of the mandatory sale of foreign currency earnings. These are the factors that restrained the fall of the ruble. On the other hand, there are factors that hinder its growth — the impact of sanctions, still high inflation, as well as the resumption of currency purchases from the National Welfare Fund under the fiscal rule. That is, the dynamics of the dollar/ruble pair this year are partly influenced by objective factors, and partly by administrative measures, and each of these groups works simultaneously to strengthen the ruble and weaken it. The bottom line is that this is the “flatness” in this pair of currencies that we have observed from the beginning of the year to the present day.”
“This stability is quite relative — in mid-January the ruble strengthened by almost 5% by the beginning of the year , and now from the lows the dollar has grown by 6-7%. In principle, there is nothing strange about this, because such volatility is now par for the course for the ruble, but the main question is what will happen in the next six months to a year.”
“The Russian currency was supported by the persistence of tight monetary conditions, as well as the gradual recovery of net sales of foreign currency by the largest exporters by the end of April against the backdrop of the tax period. The Bank of Russia maintains its key rate at 16%. Plus, the price of Brent oil rose above 90 per barrel, which ensured the replenishment of the Russian budget.”
“The sufficient stability of the ruble is associated with a number of circumstances. The relative decline in exports was largely offset by higher prices. In particular, the benchmark Brent oil price has risen from $75 to $90 per barrel since the beginning of the year. On the other hand, under the sanctions conditions, the physical volume of not only exports, but also imports was compressed, which reduces the demand for foreign currency. Inflation is quite stable. From the position of the monetary authorities, support for the ruble is the administrative obligation of exporters to sell foreign currency earnings, the high key rate of the Central Bank of the Russian Federation, and the regulation of their provision of ruble money supply to banks. The increase in budget expenditures at the beginning of the year was largely offset by an increase in tax revenues.»
» Factors putting pressure on the ruble:
— Reduction in the volume of foreign exchange interventions by the Central Bank RF from April 5. The Central Bank reduced net sales of foreign currency on the market, which put pressure on the ruble.
— Strengthening of the US dollar against most currencies amid expectations of a tighter monetary policy by the US Federal Reserve.
— Ongoing geopolitical tensions in the Middle East. The escalation of the conflict between Israel and Iran instantly increases the demand for defensive assets, including the US dollar.
— The reduction in the supply of export foreign exchange earnings could be caused by a tightening of the secondary sanctions regime. Banks from countries unfriendly to Russia are increasingly refusing to allow Russian businesses and banks to make international payments.
Factors supporting the ruble:
— Tight monetary policy of the Central Bank of Russia. The rate is 16%. The Central Bank is in no hurry to reduce it due to increased inflation.
— High oil prices, which allow maintaining budget revenues and increasing the supply of currency from exporters on the market.
— In January — March 2024, the current account surplus increased to $22 billion from $15.4 billion.
— According to the head of the Central Bank of the Russian Federation, Elvira Nabiullina, the Russian economy continues to grow at a high pace.”
“Currently, an important factor is the mandatory sale of foreign currency earnings by exporters, which was recently extended for another year — until April 2025. Additionally, the Fed may refuse to cut interest rates this year, which could lead to a stronger dollar. To counteract the rising dollar, there may be a new increase in the interest rate or its preservation at the current level of 16% until the end of the year. On the other hand, if the Central Bank of the Russian Federation and the Ministry of Finance temporarily refuse to purchase currency from the National Welfare Fund or the Central Bank of the Russian Federation begins to more actively “mirror” currency purchase operations, this may act as a noticeable factor restraining the weakening of the ruble.”
“Firstly, it will be necessary to look at what will happen to the ruble after the approval of the new government and how this factor will affect the exchange rate. Secondly, there are geopolitical factors — from the US elections and oil prices to relations with China and possible peace negotiations on Ukraine. As we see the situation at the moment, 100 rubles per dollar looks like a slightly more realistic scenario, rather than 80-85. And it would be more profitable for the budget due to the growing costs for the military and military-industrial complex.»
“It is already clear that the high key rate and the mandatory sale of foreign currency earnings from exports will remain in the coming months. It is possible that oil prices will remain fairly high and inflation will remain relatively stable.
At the same time, negative drivers for the ruble are also active and will remain relevant: the complication of payments for exports, the reduction in the share of hard currency in them reduces its supply in the domestic market. This situation will become more complicated throughout the year. Physical volumes of exports may decline. In addition, expensive oil implies an increase in foreign currency purchases by the Ministry of Finance according to the budget rule. The persistent, albeit moderate, budget deficit is also working against the ruble. In the second half of the year, a gradual reduction in the key rate of the Central Bank of the Russian Federation is expected — this will also put pressure on the ruble. Thus, the factors influencing the exchange rate are contradictory. What makes its range movement relevant.”
: “From my point of view, the current situation, when even such serious geopolitical events as the terrorist attack in Crocus or Iran’s strike on Israel have virtually no effect on the ruble exchange rate, requires reflection.
I believe that this is largely due to the peculiarities of the functioning of the Russian domestic foreign exchange market under the conditions of Western sanctions. After the start of the special operation and the introduction of restrictions, trading volumes on the market decreased by approximately 5 times. In fact, it has become a market only for domestic players — Russian banks, companies and private investors. Most transactions are made in national currencies. Under these conditions, external geopolitical shocks no longer have such a strong impact on the exchange rate as before. The Russian foreign exchange market has become much less liquid and more “manageable” with the help of administrative measures and the monetary policy of the Central Bank. A high key rate, foreign exchange interventions and other instruments make it possible to largely control exchange rate formation. In my opinion, this creates the illusion of ruble stability, but at the same time increases the risk of a sharp devaluation in the event of unforeseen events. After all, low market liquidity means that even small external influences can cause strong exchange rate fluctuations.”
: “Crocus could not, in the current situation of the ruble being closed, somehow influence the exchange rate — this is an event of a different rank. As for the conflict between Israel and Iran, there is an impact only on the shekel, rial and oil, and even then the exchange of blows did not particularly affect the price of a barrel. So these are still not events that can directly and acutely affect the ruble.”
: “Geopolitics in the form of sanctions still continues to influence the ruble exchange rate; with the announcement of each new package of sanctions, the ruble falls. In addition, conflicts in the Middle East, as a rule, lead to an increase in oil prices, and expensive oil can support the ruble, although recently there has not been such a strong dependence of the ruble on oil as it was ten years ago. But, nevertheless, the more expensive oil is, the more it smooths out the negative effects of other geopolitical factors influencing the ruble.”
: “The influence of geopolitics is indirect. It has declined in recent years due to the sharp decline in the role of foreign participants in the domestic foreign exchange market. In addition, the levers of influence on the exchange rate by economic authorities make it possible to restrain its fluctuations in one direction or another.”
: “I’ll name 6 events. The first is Biden's re-election to a second term. This scenario could lead to the continuation or even tightening of sanctions pressure on Russia from the United States. Biden has already done so many things in his first term that it could create additional risks for the ruble exchange rate.
— escalation of the military conflict between Russia and the NATO bloc. This is an extremely dangerous “black swan” that can cause large-scale destabilization, panic in financial markets and a sharp depreciation of the ruble.
— any sharp deterioration in Russia's relations with the West, be it new rounds of sanctions, trade wars or other conflicts, can cause significant fluctuations in the ruble exchange rate.
— sharp changes in energy prices. Since the export of raw materials remains a key source of foreign exchange earnings for Russia, a significant and unpredictable change in the price of oil, gas or other energy resources could seriously affect the ruble exchange rate.
— technical problems, cyber-attacks or other incidents that could disrupt the normal operation of banks, exchanges and other financial institutions may also put pressure on the exchange rate of the national currency.
— worsening macroeconomic indicators, a decrease in business activity, rising inflation or others negative trends in the Russian economy could become a trigger for the fall of the ruble.”
: “Black Swan” is so called precisely because of its unpredictability. If the arrival dates of “black swans” were well predicted, they simply would not exist. But geopolitical risks, including sanctions, have not been canceled, so we can expect that they will continue to affect the ruble.”
: “This could be a collapse in oil prices, a conflict with China, expansion sanctions on some fantastic scale, defeat on the battlefield. No other sharply negative scenarios are currently visible — more and more countries and analysts are now confident of Trump’s victory in the elections. But if something breaks out in the USA, it will affect the whole world and, first of all, Europe, which is rather positive for Russia.”
: “Significant negative consequences for the ruble may occur in the event of a global economic crisis, a collapse in demand and energy prices. Risks could also be associated, for example, with a sharp aggravation of the political situation directly affecting our country. Well, in general, “black swans” are such precisely because they are unpredictable.”
: “Nobody knows how much the ruble will be worth by the end of the year. There are too many variables that affect the exchange rate of foreign currencies against the ruble. So much can change in the world in 8 months… The real horizon of a currency forecast is no more than one month, and here I rely more on technical analysis, which does not work well in our local currency market, which is isolated from the outside world and is very low-liquidity. If the factors that have a negative impact on the foreign exchange market persist, I believe that the dollar exchange rate will be at the level of 97-98 rubles by the end of May.”
: “We believe that from May to December the dollar exchange rate may fluctuate between 89-100 rubles. On average, we expect that in the second half of the year the dollar will cost more than in the first, that is, on average it will be in the corridor of 94-96 rubles.”
: “My forecast by the end of the year remains unchanged for now — 100 or even 100+ rubles per dollar. There have been no major changes here since the beginning of the year — everything, in general, is going as usual. Oil and gas revenues have not collapsed, no new super-sanctions have been introduced, trade with BRICS is going well, the West is gradually getting tired of the topic of Ukraine and switching to other cases, such as the Houthis and Iran and Israel. Therefore, the ruble will continue to softly and gradually devalue.”
: “We should expect a continuation of the gradual weakening of the ruble in accordance with the main trend. The range of main fluctuations is 92-98 rubles per dollar, gravitating towards its upper half. It is likely to be above the level of 94-95 rubles per dollar in the coming months. We cannot rule out reaching the sacramental mark of 100 rubles per dollar and even higher.”