The ruble is trying to win back positions from the dollar
In April, the real effective exchange rate of the ruble decreased by 0.1% compared to March against the basket of currencies of Russia’s main trading partners. However, in general, during the period from January to April, the ruble grew by 0.6%. The Bank of Russia stated this in a publication on its website. Judging by trading data, May could also be an extremely successful month for the ruble. What “psychological milestone” is the national currency trying to reach at the end of spring and when will it be most profitable to buy currency for a vacation, MK found out from experts.
At the beginning of trading on Wednesday, May 22, the ruble exchange rate moved to a slight increase, as a result of which the dollar ended the working day near the level of 90.05. The euro fell below 98 yesterday, which happened to it for the first time since May 8. On Wednesday, the European currency also continued to decline and ended the trading day near the level of 97.78 rubles. For the yuan on the Moscow Exchange they gave 12.4 rubles. The Chinese currency turned out to be the only one of the trinity of foreign currencies most popular in Russia, which slightly squeezed the ruble during trading. Experts argued about how long the ruble’s pressure against unfriendly currencies will last and from what point it will then weaken.
“This week the ruble is supported by the maximum number of positive factors for it, some of which will already go away next week. Firstly, there are fundamental reasons at work — a high key rate and regulations on the mandatory sale of part of foreign currency earnings by exporters. They are in the know.
Secondly, there is also a seasonal factor. May is the beginning of the period of dividend payments, the largest share of which falls on exporters. To pay shareholders, they convert funds, which means the supply of foreign currency on the market is growing.
Thirdly, in the second half of the month, another factor was added to the indicated factors — this is the tax period. The practice of recent months shows that companies begin to convert foreign currency not at the last moment, but in advance. Because by the 28th, the entire required amount in rubles should already be in the account.
The strengthening of the ruble began on May 10. Gradually, the Russian currency regained its positions, approaching the level of 90 rubles per dollar every day. On May 22, it finally tested it, immediately dropping to 89.95 rubles per unit of American currency. Today the ruble has gone even further, strengthening at times to 89.75 rubles per dollar. The next level that opens for him is 89.5 rubles per unit of American currency. It is quite achievable this week, but I expect a correction next week.”
“The ruble continues to receive support from foreign exchange inflows following strong balance of payments results in the spring months. In addition, exporters are probably already actively converting foreign currency earnings into tax payments, trying to sell foreign currency at more than 90 rubles per dollar. Until the end of May, the ruble has a chance to continue strengthening. However, levels near or below 90 rubles. per dollar are attractive for replenishing currency reserves by the main market participants. In addition, the population may also increase interest in the currency at a rate below 90 rubles per dollar in order to prepare for the summer holidays. The high key rate of the Central Bank and tightening monetary conditions should limit consumer demand and corresponding demand for imports, which would be a favorable factor for the trade balance and the dynamics of the ruble exchange rate in the summer. However, the regulator’s strict monetary policy (keeping the key rate at 16% — “MK”) limits consumer activity to a minimal extent, and from the point of view of curbing imports, the ruble will most likely continue to be helped by problems in external payments in the near future.”
“The main reason for the strengthening of the ruble against the American dollar is the instability of the dollar itself. This is supported by the ratio of the ruble to other world currencies, which have not fallen as much. There are a number of factors that are weakening the main currency of global payments: tightening of the Fed’s monetary policy (keeping the key rate high by American standards — “MK”), publication of alarming statistics on the labor market and inflation processes. At the same time, next week in Russia is the time for tax payments, which is also a condition supporting the ruble.
On the other hand, the dynamics of declining world oil prices puts pressure on the ruble. We are awaiting a decision from OPEC+ on a possible production reduction. According to our forecast, in the next week or two, under current conditions, the ruble will be able to break through the mark of 90 rubles per dollar and drop to 88-89 rubles per unit of American currency.”
“The ruble is favored by a decrease in imports due to problems with payments with friendly countries due to US sanctions, increased expectations that the key rate of the Bank of Russia will at least remain at the current level of 16% until the end of the year, and possibly will be increased up to 17%.
We expect that in the coming weeks the ruble exchange rate will remain in the established ranges of 88-92 rubles per dollar, 96-100 rubles per euro, 12.1-12.7 rubles per yuan.< /p>
In general, the factors for the strengthening and weakening of the ruble remain balanced, which has ensured exchange rate stability for seven months in a row. In favor of the ruble are the mandatory sale of foreign currency earnings for the largest exporters, high oil prices and the surplus of the current account of the balance of payments of the Russian Federation, and the sale of yuan from reserves for 6.3 billion rubles. per day as part of budget operations, as well as high ruble interest rates. In addition, seasonally adjusted imports have been declining in recent months, including due to problems with settlements with friendly countries due to US sanctions.
Negative factors for the ruble are the seasonally increasing demand for currency since May, including for foreign tourism, geopolitical and sanctions risks, capital outflow, demand for currency to buy out shares of Russian companies from foreign owners, increased budget expenses, which, among other things, go to purchase imports.»
“One of the factors that supports the ruble is the extension of the requirement for the mandatory sale of foreign currency earnings for exporters until April 2025. The ruble is also supported by high world oil prices. It is expected that at the next meeting on June 7, the Bank of Russia will maintain or even increase the key rate by 1%. This will contribute to a slight strengthening of the ruble, as it increases the attractiveness of ruble assets.
A confident breakdown of the level of 90 rubles per unit of American currency will open the way to 88.5 rubles per dollar. Moreover, if such a scenario is realized, we should expect the dollar exchange rate to return above 90 rubles. The expected trading range for it is in the corridor of 90-94 rubles per dollar.”
“The observed strengthening of the ruble is not of a durable nature, and in general, while maintaining a favorable environment, we consider it to be the limit level of 88 rubles per dollar. According to our estimates, the strengthening may last for a month.
We are now at the very beginning of the dividend payment season, the peak of which will be in mid-summer. About half of the expected dividends come from export-oriented companies, which can sell foreign currency ahead of time for upcoming dividend payments. In addition, high interest rates, in theory, should also support the ruble, but in conditions of disrupted cross-border capital flows it is difficult to assess the degree of influence of this factor.
Thus, while the situation is favorable for the strengthening of the ruble, and in the short term The national currency exchange rate will likely continue to trade closer to the lower limit of the range of 88-94 rubles per dollar, 97-99 rubles per euro, and 12-12.7 rubles per yuan.”